For personal non-commercial use only. Do not edit or alter. Reproductions not permitted.
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DJIA 21987.56 À 0.18%
What’s
News
Business & Finance
U
.S. bank stocks tum-
bled in August as in-
terest rates slipped, and
some money managers
say lenders have farther
to fall. B1
 The battle for artificial-
intelligence expertise is
forcing Apple to grapple
with its famous penchant
for secrecy. A1
 Private-equity firms are
plowing cash into opioid
treatment centers, drawn
by soaring demand. B1
 An extended run of la-
bor-market gains this year
has produced little uptick
in wage growth or infla-
tion, complicating Fed pol-
icy decisions in the
months ahead. A5, B1
 Apple and Amazon are
bolstering the teams that
run their Siri and Alexa
virtual assistants as com-
petition heats up in the
sector. B4
 Huawei launched a new
chipset with built-in AI ca-
pabilities to power its
next-generation smart-
phones and take on Apple
and Samsung. B4
 German domestic
stocks are surging above
their internationally fo-
cused peers. B7
 Legend Holdings made
one of China’s biggest for-
ays into European banking
with an agreement to buy
Banque Internationale à
Luxembourg. B8
 Banks have cut their
forecasts on oil prices for
a fourth consecutive
month as analysts brace
for further supply when
OPEC’s agreement to cap
output ends next year. B8
World-Wide
 North Korea said it
conducted a sixth and sig-
nificantly larger nuclear
test, stepping up pressure
on Trump. A1
 A U.S. threat to with-
draw from its trade pact
with South Korea risks
alienating an ally as fears
intensify over North Ko-
rea’s weapons program. A1
 Finding housing for vic-
tims displaced by Harvey
poses a major challenge
for Houston. A7
 U.S.-backed Syrian
forces retook the old city
of Raqqa, inching closer to
fully capturing what was
ISIS’s de facto capital. A3
 The Pentagon set a
schedule of naval patrols
in the South China Sea in
an attempt to create a con-
sistent posture to counter
China’s claims there. A4
 A letter Trump drafted
to Comey laying out why
he didn’t want the then-FBI
chief to stay in the job has
been turned over to Special
Counsel Mueller. A5
 A border standoff be-
tween China and India has
magnified friction over
trade and security days be-
fore their leaders meet. A3
 Trump is set to an-
nounce Tuesday whether
the Obama-era “Dreamers”
immigrant program will be
retained. A5
 Cambodian authorities
arrested the opposition
leader, raising concerns of
a worsening climate of po-
litical repression. A3
CONTENTS
Business News...... B3
Crossword.............. A12
Europe File............... A2
Harvey fallout... A6-7
Heard on Street.... B8
Life & Arts.... A8-9,12
€3.20; CHF5.50; £2.00;
U.S. Military (Eur.) $2.20
s Copyright 2017 Dow Jones &
Company. All Rights Reserved
NASDAQ 6435.33 À 0.10%
Pyongyang Hails ‘Perfect’ Test Blast
In response, Mattis
warns North Korea
that Washington has
‘many military options’
BY JONATHAN CHENG
SEOUL—North Korea said it
conducted a sixth and signifi-
cantly larger nuclear test Sun-
day, stepping up pressure on
President Donald Trump in
what is shaping up to be his
biggest foreign policy crisis.
In a televised statement,
KCNA/AGENCE FRANCE-PRESSE/GETTY IMAGES
Kim Jong Un, center, in a photo released Sunday by state media. He boasted that Pyongyang’s thermonuclear weapon is domestically made.
INSIDE
CARL COURT/PRESS ASSOCIATION/ZUMA PRESS
THE KEY TO
THE BREXIT
PROCESS
EUROPE FILE, A2
Secretive Apple Is
Opening Up on AI
BY TRIPP MICKLE
The battle for artificial-in-
telligence expertise is forcing
Apple Inc. to grapple with its
famous penchant for secrecy,
as tech companies seek to woo
talent in a discipline known for
its openness.
The technology giant this
year has been trying to draw
attention—but only so much—
to its efforts to develop artifi-
cial intelligence, or AI, a term
that generally describes soft-
ware that enables computers
to learn and improve functions
on their own.
Apple launched a public
The AI Arms Race
Apple is a latecomer among tech companies publishing
Markets...................... B8
Markets Digest..... B6 AI-related research.
Opinion.............. A10-11
Technology............... B4 Number of company research papers
U.S. News.................. A5
Weather................... A12 Microsoft
World News....... A2-4
Google
Facebook
Apple†
*Google research in machine intelligence. †Published research on ‘‘Apple
Machine Learning Journal."
Source: the companies
MONDAY, SEPTEMBER 4, 2017 ~ VOL. XXXV NO. 151
NIKKEI 19691.47 À 0.23% STOXX 600 376.14 À 0.60%
North Korea described the un-
derground explosion, which
triggered a large earthquake,
as a “perfect success in the
test of a hydrogen bomb for an
ICBM.” Pyongyang said “the
creditability of the operation
of the nuclear warhead is fully
guaranteed.”
U.S. Defense Secretary
James Mattis warned North
Korea in stark terms that any
attack on the U.S. or its allies
would be met with a massive
military response, in com-
ments that came after a na-
tional-security briefing with
TO REBUILD, OR TO CUT TIES
Three floods in three years force residents of a thriving Houston neighborhood to make painful choices
HOUSTON—Chris Bisel sat next to
his son in a grocery store parking lot
on Aug. 26, hoping the rising waters
would recede enough for him to reach
By Bradley Olson,
Dan Frosch
and Lynn Cook
his wife, Jamie, who was trapped in
their home. He was stunned. It was
happening again.
Harvey was deluging one of the
most flood-prone major cities in the
country with the heaviest rains ever re-
corded in the continental U.S. And for
blog in July to talk about its
work, for example, and has al-
lowed its researchers to speak
at several conferences on arti-
ficial intelligence, including a
TED Talk in April by Tom Gru-
ber, co-creator of Apple’s Siri
voice assistant, that was
posted on YouTube last month.
Talking up transparency is
unusual for a company whose
chief executive, Tim Cook,
once joked that it is more se-
cretive than the Central Intelli-
gence Agency.
The shift is driven by AI’s
growing importance in areas
like self-driving cars and voice
Please see APPLE page A2
2016 847
2017 394
203
146*
112
160
1
3
THE WALL STREET JOURNAL.
WSJ.com EUROPE EDITION
BRENT 52.75 À 0.21% GOLD 1324.50 À 0.63% EURO 1.1880 g 0.25%
Mr. Trump called in response
to Pyongyang’s test.
“We have many military op-
off what he described as a hy-
drogen bomb capable of being
mounted on an intercontinental
the nuclear test site in recent
months. Any structural collapse
might have been related to that.
tions and the president wanted ballistic missile. Estimates of the size of Sun-
to be briefed on each one of The explosion at the nuclear day’s initial earthquake varied
them,” said Mr. Mattis in com- test site at Punggye-ri in North among different agencies, but
ments Sunday afternoon, ac- Korea’s mountainous northeast the USGS said it had a magni-
companied by Gen. Joseph triggered an initial magni- tude of 6.3. According to the
Dunford, chairman of the Joint tude-6.3 earthquake, followed logarithmic scale used to mea-
Chiefs of Staff. Mr. Mattis by a magnitude-4.1 temblor that sure earthquakes, a 6.3 quake
warned that any attacks on the was possibly caused by a struc- would be 10 times bigger than
U.S., Japan or South Korea “will tural collapse, according to the the one triggered by the North’s
be met with a massive military U.S. Geological Survey. previous nuclear test in Sep-
response, a response both ef- While it was unclear what Please see TEST page A4
fective and overwhelming.” set off the second quake, satel-
The test came just hours af- lite imagery has captured evi-  North Korea’s newest threat:
ter leader Kim Jong Un showed dence of tunneling activity at electromagnetic pulse.......... A4
U.S. Trade
Challenge
Ups Ante
In Seoul
BY JONATHAN CHENG
SEOUL—A U.S. threat to
withdraw from its bilateral
trade agreement with South
Korea risks alienating a key
ally as fears intensify over
North Korea’s advancing nu-
clear-weapons program.
North Korea on Sunday
tested its largest ever nuclear
device only hours after aides
to U.S. President Donald
Trump said he was consider-
ing pulling the plug on the
U.S.-Korea Free Trade Agree-
ment, known as Korus.
Scrapping Korus—the larg-
est bilateral trade deal by dol-
lar value for both the U.S. and
South Korea—would inject fur-
ther instability into the alli-
ance between Washington and
Seoul as they seek solutions to
Please see KOREA page A4
the third year in a row, flooding would style home was set to be raised 5 feet
wreak havoc on his home in Meyer- with about $350,000 in financial aid he
land, a neighborhood of about 2,300 was receiving through a federal grant
homes on the city’s southwest side. program. But the work hadn’t started
The floods, after years without yet; he had lost a race against time.
problems, are making Mr. Bisel and “My friends say, ‘Why do you stay if
others question the viability of their it keeps flooding?’ ” said Mr. Bisel, 48. “I
homes and deep attachment to neigh- try to explain that this is my home, this
borhoods where they made their lives. is where I grew up, and it didn’t used to
Houston’s plight is an extreme example be this way, at least not this bad.”
of what is being felt in communities
around the country, bedeviling politi-
Similar stories played out in homes,
businesses and places of worship all
cians and city planners as well as along the Meyerland neighborhood
homeowners, as areas become more
flood-prone and damaging storms in-
Please see FLOOD page A6
crease in frequency.  Trump returns to devastated region..... A7
Mr. Bisel’s 3,800-square-foot ranch-  Storm victims check fine print................. B5
A Record
That’s Out
Of This
World
SAFE: Peggy
Whitson returned to
Earth after 288
days in space,
bringing her total
time to 665 days,
longer than that of
any American or any
woman world-wide.
Her landing in
Kazakhstan, left. A3
SERGEI ILNITSKY, PRESS POOL
Ashamed of Your ’90s Clothes? Young Adults Love Them
i i i
Baggy fits, giant logos are a ‘vintage’ hit with young millennials
BY KHADEEJA SAFDAR people have stuff I’ve never
seen before, and I’m like,
Tommy Hilfiger clothes are ‘Whoa,’” Mr. LaBella says.
about two decades past their “Own a piece of history,”
heyday, but you wouldn’t touts a listing for a used Guess
know it from Dominic La- Jeans shirt, billed as a “solid
Bella’s closet. piece from the 1990s.” The
The 20-year-old Michigan asking price: $275.
resident, whose friends call Mr. LaBella sold a $4 Hil-
him “Dommy Hilfiger,” buys, figer shirt he found at a Good-
wears and sells clothing from will store for more than
a slice of 1990s fashion aban- $200—proving, he says, that
doned for years to attics and Tommy Hilfiger garb “one person’s trash is another
thrift shops. person’s treasure.”
Mr. LaBella and other youn- and Nautica. Used sweatshirts, Demand for ’90s clothing
ger millennials are snapping Windbreakers and track pants by teens and young 20s ex-
up logo-marked clothes that from the 1990s are listed on- poses a generation gap with
include such brands as Fubu line by the thousands. “Some Please see STYLE page A2
For personal non-commercial use only. Do not edit or alter. Reproductions not permitted.
To reprint or license content, please contact our reprints and licensing department at +1 800-843-0008 or www.djreprints.com
A2 | Monday, September 4, 2017
Trade: Reddest of Britain’s Brexit Red Lines
EUROPE FILE
By Simon Nixon
One by one, many of the
U.K.’s red lines for leaving
the European Union are be-
ing watered down. Over the
summer, the government
conceded that EU citizens
will continue to enjoy the
right to live and work in the
U.K. more or less as they do
now, at least for a transi-
tional period
of up to three
years; it also
softened
Prime Minis-
ter Theresa
May’s pledge
to end the jurisdiction of the
European Court of Justice to
a commitment to end only
direct jurisdiction; and de-
spite a standoff in Brussels
last week, the U.K. has ac-
knowledged it has financial
obligations to the EU and
that it may continue to pay
into EU coffers after Brexit
to secure access to markets
and programs.
But as other red lines
soften, one red line has hard-
ened to the point where it
now holds the key to the
STYLE
Continued from Page One
older millennials. Some of
them who came of age during
the 1990s are baffled to see
new passion for the brands of
their youth—and many are
rattled by the idea that the
clothes are old enough to be
called vintage.
Emily Collins, a 26-year-old
communications manager in
New York, says she couldn’t
believe that a Tommy Hilfiger
sweater was priced at more
than $100 at The Vintage
Twin in New York City. She
took a picture and tweeted,
“How?”
She remembers when such
sweaters sold for less than
$20, she says, back when she
was a middle-school student
in West Haven, Conn.
“Fashion is rooted in nos-
talgia, so in some weird way it
does make sense for some-
thing like Tommy Hilfiger to
resurface,” says Amber Snider,
a 30-year-old design editor in
New York.
In middle school, she wore
yellow and green Hilfiger
Windbreakers occasionally
paired with a Ralph Lauren
APPLE
Continued from Page One
assistants such as Siri. Rivals
including Alphabet Inc., Micro-
soft Corp. and Facebook Inc.
have been racing for years to
gather talent in the field—
largely by recruiting Ph.D. stu-
dents and professors from uni-
versity computer-science
programs.
Those academics say they
want to join companies but
still publish regularly, pres-
ent research and discuss
their work.
“We come from a commu-
nity where we share ideas and
get credit for it and a lot of us
would be very unhappy to give
that up,” said Noah Goodman,
a Stanford University profes-
sor of computer science. He
works with a research division
of Uber Technologies Inc.
where he enjoys those perks.
Indeed many big tech com-
panies have embraced aca-
demia’s relative transparency.
They have aggressively re-
cruited top researchers over
the years such as Yann LeCun
of New York University, who
joined Facebook in 2013, and
Geoffrey Hinton of the Univer-
sity of Toronto, who joined
Alphabet’s Google unit in
2013.
The companies together
also have churned out hun-
dreds of research papers over
the past several years.
Apple was slow to follow,
AI analysts and leading re-
searchers say. And even since
its public embrace of greater
transparency, it has published
a fraction of its competitors’
research, and its scientists
Brexit process: Any new rela-
tionship with the EU must al-
low the U.K. the freedom to
negotiate its own free-trade
deals with third countries.
For a Conservative party de-
termined to dissociate itself
from the nativist anti-immi-
gration agenda of fellow Br-
exiters in the UK Indepen-
dence Party, the need to go
into the next election due in
2022 having signed indepen-
dent trade deals has assumed
totemic importance. As one
senior cabinet minister puts
it: “If we can’t do that, what’s
the point of leaving?”
B
ut Mrs. May’s problem
is that this political
imperative is at odds
with her goal of securing a
“deep and special partner-
ship” that enables the con-
tinuation of frictionless
trade with the EU. To strike
trade deals, a country needs
to have something to trade:
tariffs or regulation or ide-
ally both. Yet the only way
to maintain frictionless trade
between the U.K. and the EU
is for the U.K. to remain in
both a customs union and a
regulatory union with the
EU, mirroring exactly the
EU’s external tariffs and reg-
ulations, leaving no scope to
sign its own independent
trade deals. The U.K. govern-
ment has spent more than a
year trying to devise ways
around this conundrum but
the reality is that it can’t be
purse, a look she would revisit
only out of jest, she says,
though “I do miss that yellow
windbreaker.”
Mr. Hilfiger says his brand
was a pioneer of baggy dress
and oversize logos: “Today,
we’re seeing the resurgence of
this look with millennials that
are discovering the ’90s trend
for the first time.”
The era also featured
choker necklaces, button-down
flannel shirts, striped sweaters
and acid-wash denim. Many
items arrived in the first big
wave of fashion imports after
U.S. retailers shifted produc-
tion to China
Resurrection of the ’90s-
look has sparked debate
among sellers over what, ex-
actly, is “vintage.” The online
marketplace Etsy Inc. says it
is anything older than 20
years, making most ’90s
clothes fair game.
Some old-school sellers ob-
ject. “The fact that they can
get away with calling that
stuff vintage just kills me,”
says Kristine Anderson, a 68-
year-old in San Diego. She
sells clothes and accessories
dating to the 19th century, as
well as 1940s dresses and
1930s lingerie.
The term “vintage” should
have avoided speaking about
Apple-related research at
conferences.
To date, the company has
published portions of four
peer-reviewed research papers
on its blog, the Apple Machine
Learning Journal. The three
posts published this year are
attributed to the Siri team and
don’t name any individual re-
searchers the way academic
papers commonly do.
At a San Francisco confer-
ence in March on using AI in
autonomous vehicles, Apple
research scientist Charlie
Tang gave a presentation on
robotics—but the photo he
Apple launched a public blog in July to talk about its work.
WORLD NEWS
The U.K. has softened Prime Minister May’s pledge to end European Court of Justice jurisdiction.
done.
To see why, consider the
case of Turkey, which actu-
ally has its own customs
union with the EU yet whose
exporters still experience
lengthy delays at the border.
That is partly because Tur-
key’s customs union doesn’t
cover all goods. The moment
you introduce exceptions in
the customs regime you need
to have border checks to en-
sure that excluded goods
aren’t slipping into the EU
tariff free, said Dr. Peter
Holmes, an expert in trade
policy at Sussex University.
A second issue is that Tur-
key is not part of the EU’s
regulatory union—the Euro-
Dominic LaBella, age 20, displays vintage Tommy Hilfiger clothes.
be limited to describing ap-
parel produced before 1965, or
what Ms. Anderson calls the
“pre-polyester era.” Clothes
from the 1990s rehashed older
styles and weren’t particu-
larly well made, she says:
“Even the street fashion,
which is usually interesting,
was terrible.”
Gail Higgins, 69 years old,
opened her vintage clothing
store in London in 1988, and
says lately she has started
avoiding the term altogether:
showed was from Google. He
didn’t specifically mention any
of Apple’s work.
“We want to open commu-
nication with the [artificial in-
telligence] community,” Mr.
Tang said in an interview af-
terward before directing ques-
tions about that strategy to
Apple executives.
Most Apple revenue comes
from products like the iPhone
or iPad, which are held in
strict secrecy before their
launch to protect innovations,
and “overcoming that [cul-
ture] is difficult,” said Jack
Clark, who heads strategy at
OpenAI, a nonprofit, artificial-
STEPHEN LAM/REUTERS
pean Economic Area—which
ensures that all goods circu-
lating in the EU comply with
the same standards. So fur-
ther border checks are re-
quired to ensure that Turk-
ish exports are safe.
Sure, there are ways to
minimize barriers but it is
impossible to remove en-
tirely the need for checks.
Norway, for example, is part
of the EEA, which means its
exports are deemed safe to
sell in the EU, but it is out-
side the customs union,
which means that its exports
still face border checks to
ensure that the goods are in-
deed Norwegian and didn’t
originate in a third country.
BRIANNA BROWNELL
“Nowadays everyone calls
themselves a vintage dealer.”
She sells clothing that
spans the 1930s to 1970s, fash-
ion that has withstood the test
of time, she says, in contrast
to the 1990s.
“There are things that will
always be beautiful and they
are much harder to find,” she
says. “And then there are
things people throw in the
trash.”
Tommy Hilfiger’s U.S. sales
hit a peak in 2000 from its
intelligence research group.
He added that Apple’s blog
was a positive step for the
company.
An Apple spokesman de-
clined to comment on Mr.
Clark’s remarks.
Though guarded about
products, Apple is a long-
standing member of industry
standards groups like the
World Wide Web Consortium
and has contributed to open-
source projects over the years.
Competitive concerns are
one reason companies might
want to be careful about dis-
cussing AI work. But Dr. Good-
man of Stanford said compa-
nies generally don’t need to
worry about losing their com-
petitive edge because the al-
gorithms published in papers
only work with proprietary
data and remain essentially
locked.
Apple’s continued restraint
has stoked skepticism about
its pledged transparency and
doubts about its ability to re-
cruit researchers. Tom Aus-
tin, an analyst in AI at re-
search firm Gartner Inc., said
Apple would struggle to “suc-
ceed with a strategy that’s
bottled up.”
Apple in October named
Carnegie Mellon University
professor Ruslan Salakhutdi-
nov as its director of AI re-
search. He joined Carlos Gues-
trin, a University of
Washington professor whose
company Apple acquired in
August 2016.
Dr. Salakhutdinov an-
nounced at an artificial-intelli-
gence conference in December
that Apple intended to be
more open and would start
publishing. Cornell University
Library published that month
THE WALL STREET JOURNAL.
safe, notes Dr. Holmes. That
would mean new frictions to
EU trade.
As things stand, British
ministers still refuse to ac-
knowledge that the U.K. will
face any trade-off between
frictionless EU trade and the
freedom to pursue indepen-
dent trade deals. The official
position—set out in a series
of papers in August—is that
the U.K. should be able to
set its own regulatory stan-
dards and have these recog-
LEON NEAL/GETTY IMAGES
nized by Brussels while us-
ing innovative technological
solutions to obviate the need
for customs border checks.
Even so, the government al-
ready appears to be already
backing away from its most
eye-catching proposal—that
every import into the U.K. be
Regulatory order checks fitted with a tracking device
can also be streamlined by to determine whether it was
mutual recognition agree- destined for the domestic or
ments whereby both sides EU market—just two weeks
agree to respect each other’s after first floating it.
standards, surveillance and
B
enforcement systems. But ut privately, British of-
even if the EU agree to rec- ficials accept that the
ognize post-Brexit U.K. regu- trade-off is real and
latory standards—unlikely will have to be confronted:
unless they were exactly Ministers will have to decide
aligned with those of the how much disruption to
EU—the moment the U.K. U.K.-EU trade—and indeed to
agreed a free-trade agree- trade with the 48 countries
ment with a third country with which the EU itself has
that included recognition of a free-trade agreement—they
a different set of standards— are willing to countenance to
say, over food hygiene—new secure their prize of inde-
border checks would inevita- pendent free-trade deals. Or
bly be needed to ensure that whether this red line too will
goods entering the EU were have to yield to reality.
start in 1985, losing its cool as
clothing ended up on the racks
of off-price retailers and out-
let stores. Sales have since
memories of my parents being
my age,” says Isa Cruz, a 27-
year-old Etsy seller in Port-
land Ore. “I get scoffed at
climbed overseas, and the from old people,” she says,
brand has benefited from re- “but I don’t care.”
cent collaborations with su- Many older millennials and
permodel Gigi Hadid. Gen Xers haven’t yet come to
Several retailers have been terms with the idea that their
trying to get in on the ’90s-as- childhood clothes have taken a
vintage trend. turn on fashion’s nostalgia
Gap Inc., which has long rack.
struggled to recapture the “I definitely don’t feel old
magic of those glory retail enough for my high-school
years, said earlier this year it clothes to be considered vin-
was reissuing a 1990s collec- tage,” says Megan Wirts, a 35-
tion that included bodysuits year-old writer near Grand
and pleated khakis. Urban Out- Rapids, Mich.
fitters Inc. also has been sell- She was aghast when her
ing the era’s signature brands, 13-year-old daughter, search-
including FILA and Tommy ing for a vintage look, made
Hilfiger. her way to mom’s closet and
Gap declined to comment. emerged with some flannel
Urban Outfitters, Nautica and shirts, Ms. Wirts said. “I
Guess didn’t respond to re- thought she meant ’60s or
quests for comment. ’70s—not my things!”
“We have an opportunity to Andrea Ezell, a 22-year-old
inspire a new generation of Kennesaw State University
consumers who are discover- student in Atlanta, raided her
ing and embracing the brand,” dad’s closet for Fubu jerseys
says Danny Lieberman, a se- and other era throwbacks. The
nior vice president at FILA clothes fit big, she says, but
North America. Fubu co-owner have an attractive “retro
Bruce Weisfeld agrees it is a vibe.”
welcome trend. “Your kids are never going
For some people, the 1990s to tell you that you’re hip,”
comeback echoes happier she says, “but they will go into
times. “It brings back the last your closet.”
Apple’s first research paper
since Dr. Salakhutdinov’s ar-
rival on improving graphic
recognition.
Dr. Goodman of Stanford
said that contrast has made
joining Apple feel “like a one-
way move into industry
In January, Apple joined whereas the AI labs like
Facebook, Microsoft and oth- Google and Facebook feel
ers as a member of the Part- more permeable.”
nership on AI, a group com- Though Apple’s public re-
mitted to developing best search has been limited, Manu-
practices for research. ela Veloso, a computer science
In an interview earlier this professor at Carnegie Mellon,
year, Dr. Salakhutdinov said advises her students to con-
Apple would publish more, but sider jobs that offer the oppor-
declined to say how much. tunity to influence consumer
“You can have quantity, but products—an area where Ap-
producing high quality re- ple has an advantage.
search is very important,” he “If you do this research at
said. Apple, it’s their prerogative to
Microsoft Research, have their [intellectual prop-
Google and Facebook AI Re- erty],” Dr. Veloso said.
search each have published
more than 100 papers on ar- THE WALL STREET JOURNAL.
tificial intelligence topics Europe Edition ISSN 0921-99
since January. The News Building, 1 London Bridge Street,
London, SE1 9GF
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THE WALL STREET JOURNAL. Monday, September 4, 2017 | A3

WORLD NEWS
ISIS Loses Ground in Raqqa Cambodia Arrests
Old quarter of
extremists’ de facto
Opposition Head,
capital in Syria falls;
civilians suffer heavily Closes Newspaper
BY MARIA ABI-HABIB BY JAMES HOOKWAY ities have 72 hours to charge
AND NOUR ALAKRAA or release him.
Cambodian authorities ar- “The arrest of opposition
U.S.-backed Syrian forces rested the country’s opposi- leader Kem Sokha early this
retook the old city of Raqqa, tion leader and effectively morning takes the ongoing
U.S. officials said Sunday, forced the closure of one of its crackdown by the ruling party
inching closer to fully captur- last remaining independent in Cambodia to an alarming
ing what was once the extrem- newspapers on Sunday, raising new level,” said Charles Santi-
ist group’s de facto capital concerns of a worsening cli- ago, a Malaysian lawmaker
used by militants to plan and mate of political repression and chairman of a panel of
stage attacks on the West. ahead of elections scheduled lawmakers supporting human
With the advance into the for next year. rights in Southeast Asia. “For
old city, the Kurdish-led Syrian Opposition politician Kem months, we have been wit-
Democratic Forces, backed by Sokha was taken from his nessing the escalation of gov-
U.S. Special Forces, have taken home in an early-morning raid ernment attempts to cripple
about 60% of the city of Raqqa and is accused of plotting to the opposition, but it appears
and are nearing some of the overthrow the government now that Prime Minister Hun
key infrastructure used by Is- with the support of the U.S. Sen is so afraid of what might
lamic State that could provide Hours later, the Cambodia happen in a genuine vote, he
SARAH EL DEEB/ASSOCIATED PRESS

important intelligence on the Daily, long a champion of hu- won’t allow for competition at
group. man-rights causes, said it all.”
The forces are now less would cease business as a re- Australia’s government also
than a mile from Islamic sult of what it characterized spoke out, calling for the mat-
State’s military barracks, reli- as a politicized tax dispute. ter to be investigated in a
gious courts and the main Analysts said the moves re- transparent fashion.
public square where the group flect how Cambodia’s longtime The government didn’t re-
declared its rule over Raqqa in leader Prime Minister Hun Sen spond to a request for com-
2014 and later conducted the is battening down the hatches ment on its action related to
public punishments that be- A Syrian Democratic Forces fighter positions himself in a destroyed apartment in Raqqa. ahead of next year’s vote. the newspaper or otherwise
came the hallmark of its ty- Mr. Hun Sen last month but speaking to Fresh News, a
rannical rule. population, U.S. and Iraqi offi- asked to be identified by his some 300 militants and their called the Cambodia Daily “a pro-government website, Mr.
“Another Milestone: #SDF cials say. first name only as relatives families who were allowed to thief” and suggested its Amer- Hun Sen, a former Khmer
in last 48 hrs complete libera- The Syrian Democratic still live under Islamic State evacuate a region on the Leba- ican founders should “pack up Rouge soldier who has led
tion of #Raqqa’s old city (long- Forces have led the battle for rule. nese border in southwestern and go.” On Sunday, his gov- Cambodia for more than 30
time #ISIS stronghold) and Raqqa as they have against Is- The anti-Islamic State ac- Syria last week remain ernment issued its owners a years and emerged as one of
evacuate 1000s of civilians,” lamic State’s other territories tivist group Raqqa Is Being trapped in the central prov- tax bill for $6.3 million, based China’s most reliable regional
Brett McGurk, the U.S. presi- in Syria. Slaughtered Silently said ince of Homs, just south of on authorities’ own calcula-
dent’s special envoy in the The mostly Kurdish force Raqqa’s civilians are facing Deir Ezzour province where tions of the paper’s revenue
battle against Islamic State, has some Arab fighters. But it hunger with food shortages they intended to go. and a 20% profit margin.
tweeted Sunday. has also been accused of nu- while the water for an esti- Hezbollah and the Syrian The newspaper says it oper-
Analysts say prime
Despite the gains in Raqqa merous rights violations by mated 10,000 civilians still government had brokered a ates at a loss and has offered minister is battening
and across the border in Iraq human-rights groups and Ar- stuck in the city has been con- deal for the extremists to tax inspectors the opportunity
in recent months, Islamic abs, such as forcing Arabs out taminated. leave the border region and go to examine its accounts.
down the hatches
State still holds a significant of their homes to grab land for Airwars, a monitoring to Deir Ezzour in exchange for Cambodia’s government has ahead of election.
amount of territory in Syria. a semiautonomous state they agency that assess the impact information on the where- also initiated tax investiga-
The group moved its leaders aspire to build in northern of international airstrikes, said abouts of nine Lebanese sol- tions into U.S.-funded broad-
and valued equipment to the Syria. The Kurds are an ethnic Thursday that a minimum of diers who were kidnapped by casters Radio Free Asia and
eastern Syrian province of minority in Syria. 860 civilians, including some the group in 2014. Voice of America, both of partners, said police had no
Deir Ezzour about a year ago. Some of the biggest losers 150 children, are “credibly re- The convoy of 17 buses left which say they comply with choice but to arrest Mr. Kem
The U.S.-led coalition bat- in the fight against Islamic ported” to have been killed in the Lebanese border region Cambodian law. Sokha. “It’s an act of treason
tling Islamic State and the State have been civilians, with Raqqa since the U.S.-backed last Tuesday and has lan- In a statement, the Cambo- and includes conspiring with a
Syrian regime’s military are residents of Raqqa city report- forces launched their assault guished just south of Deir Ez- dia Daily’s management said foreign country against his
both slowly converging on ing thousands wounded or on the city in June. zour as U.S. airstrikes have government threats to freeze own nation,” Mr. Hun Sen said,
Deir Ezzour to squeeze the ex- killed by U.S.-led coalition air- The U.S.-led coalition has prevented Islamic State from its accounts and prosecute its adding that the co-conspirator
tremists from the province, strikes or caught in the cross- played down the numbers of sending its troops to meet the owners are forcing it to pull in this case was the U.S.
which borders Iraq and has fire ground fighting. civilians killed in its opera- convoy. The Pentagon harshly down the shutters. It will close Mr. Hun Sen has grown in-
some of Syria’s largest oil “The civilians are paying tions against Islamic State. criticized the deal but the on Monday. creasingly critical of what he
fields. the highest price,” said Uday, Islamic State fighters were U.S.-led coalition has said it “There may well be a legiti- says is American meddling in
In Iraq, the birthplace of who is from Raqqa and is in also under pressure in a sepa- won’t strike the convoy be- mate dispute between the tax Cambodian affairs, and sus-
the group, the militants have touch with his family there rate standoff in the desert of cause of the presence of department and the owners of pended joint military exercises
largely melted back into the but now lives in Turkey. He eastern Syria. A convoy with women and children aboard. the Daily over when tax be- with U.S. forces earlier this
came collectible and in what year. On Sunday his govern-
amount,” wrote deputy pub- ment released a video of Mr.

Geopolitics Dents China-India Trade

BY EVA DOU construction of a road in an
area claimed by China and
BEIJING—A tense border Bhutan, a close Indian ally
standoff between China and sandwiched between the two
India has magnified friction Asian giants. India fears the
over trade and security be- road will be used for military
tween the two nations days purposes, reflecting broader
before their leaders meet face territorial ambitions by China
to face. that have alarmed New Delhi
In India, the strife on a re- and pushed it to seek closer
mote Himalayan plateau has defense ties with the U.S. and
fanned hostility toward Chi- Japan.
nese companies and calls for Beijing and New Delhi this
economic retaliation against week agreed, without disclos-
China, whose soaring exports ing details, to pull back from
to India have already invited the brink ahead of a meeting
criticisms of unfair trade. between Indian Prime Minister
The scenario echoes Chi- Narendra Modi and Chinese
nese disputes with other na- President Xi Jinping at a Brics
tions, including the U.S., as summit in Xiamen, China, that
China’s trade relationships get began on Sunday and also in-
caught up in other bilateral cludes Brazil, Russia and
strains. South Africa.
President Donald Trump China and India, the world’s
has launched a trade probe most-populous nations, are
and threatened economic ret- the only Brics countries to
ribution against Beijing, say- have avoided recession in the
ing it doesn’t pressure North past year, and they will likely
Korea enough over its nuclear find some common ground at
cade, as China sold rising
Trade Imbalance quantities of electronics, ma-
China exports four times as chinery and chemicals. But im-
much to India as a decade ago, ports have barely grown as
while the reverse flow has China’s slowing economy sup-
stayed much the same. pressed its need for natural
resources such as copper, cot-
China exports to India ton and petroleum from India.
China imports from India India also has said that China
often sells goods below cost.
$6 billion
India’s commerce minister
discussed trade “in a candid
5 manner” with her Chinese
counterpart at an Aug. 1 meet-
4 ing in Shanghai, India’s con-
sulate general there said.
3 Much as China’s untapped
market once exerted a pull on
2 the West, India now attracts
China. Companies including
1 Chinese smartphone maker Xi-
aomi Corp. count India as
0
their largest overseas market.
Indian consumption will triple
2010 ’17 to $4 trillion by 2025, Boston
Source: Wind Info Consulting Group estimates,
THE WALL STREET JOURNAL. and the country plans a $59
billion infrastructure upgrade.
forcing India to rethink its But only about 3% of Chinese
lisher Deborah Krisher-Steele
and editor in chief Jodie De-
Jonge. “In an ordinary pro-
cess, matters in dispute would
be resolved after an audit and
private negotiations. Instead
the Daily has been targeted
with an astronomical tax as-
sessment, leaks, and false
statements by the tax depart-
ment and public vilification by
the head of government…”
On its final day of opera-
tions, the Phnom Penh news-
paper’s online edition pub-
lished rolling coverage of Mr.
Kem Sokha’s arrest and the
fallout.
Mr. Kem Sokha is Mr. Hun
Sen’s chief political rival and
in theory enjoys parliamentary
immunity from arrest. Author-
Kem Sokha seemingly telling
supporters that he had the
support of the U.S.
The U.S. government didn’t
immediately comment on the
allegations.
Mr. Kem Sokha couldn’t be
reached for comment. He be-
came leader of the Cambodia
National Rescue Party in Feb-
ruary after his predecessor
Sam Rainsy resigned and
opted to live in exile to avoid
imprisonment on a defamation
conviction he says was politi-
cally motivated. His daughter
Kim Monovithya wrote on her
Twitter page that her father
and his bodyguards “were
taken away by 100-200 police
without warrant after they
raided his home.”
AGENCE FRANCE-PRESSE/GETTY IMAGES

program. China, meanwhile, the summit. On Friday, India’s trade strategy,” said Brahma exports now go to India.
has lashed out at South Korea Commerce Ministry said the Chellaney, a professor at the “The potential could be
over the installment of a U.S. two countries had jointly Centre for Policy Research in huge,” said Li-Gang Liu, Citi
missile-defense system there, called on the World Trade Or- New Delhi. “A lot of Indians Research economist, of Chi-
with Chinese consumers ganization to eliminate certain during the crisis were asking nese exports to India. “How-
spurning the country’s autos farm subsidies for developed how India lets China rack up a ever, fulfilling this potential
and other goods. countries like the U.S. None- growing trade surplus while remains a challenge, affected
The Himalayan standoff, theless, the border clashes treating India as an enemy.” not only by tariffs and trade
which had raised concerns over the past month have Exports from China, India’s protectionist measures, but
about a potential military con- made the relationship tense. largest trading partner, have also political risks such as bor-
flict, was sparked by China’s “This particular standoff is quadrupled over the past de- der disputes and standoffs.” Police escort Kem Sokha, left, from his home in Phnom Penh.

KENYA 8 election. The court on Friday
said the electoral commission
President Warns had committed irregularities in
Judiciary After Poll the vote and called for a new
election within 60 days.
President Uhuru Kenyatta The judiciary has a “problem,”
promised to “fix” the judicial sys- Mr. Kenyatta said Saturday in
tem a day after the Supreme comments to elected officials
Court nullified his re-election, and from county assemblies. He also
he warned the chief justice and announced the start of his new
judiciary not to interfere with the campaign.
electoral commission as the “We shall show you in 60
country prepares for a new presi- days that the will of the people
dential vote. cannot be overturned,” Mr. Ke-
Mr. Kenyatta again accused nyatta said. “We will come back
the court of overturning the will and revisit this issue....Going for-
of the people after he had been ward, we must fix it.”
declared the winner of the Aug. Opposition leader Raila Odinga
WORLD WATCH
had petitioned the court chal-
lenging Mr. Kenyatta’s win, claim-
ing manipulation. He wants the
electoral commission disbanded.
Mr. Kenyatta’s party deputy
chief whip in the Senate, Irungu
Kangata, said Friday the party
will use its numerical strength in
parliament to stop any attempt
to disband the commission.
Constitutional lawyer Bob
Mkangi said the electoral com-
mission likely won’t be disbanded
unless the commissioners resign
or lawmakers from the ruling and
opposition parties reach a negoti-
ated settlement.
—Associated Press
GERMANY
World War II Bomb
Defused in Frankfurt
Police gave the all-clear after
disarming a World War II era
“blockbuster” bomb that led to the
evacuation of more than 60,000
residents in Frankfurt, the largest
evacuation in since the war.
“It’s done! The bomb has been
successfully disarmed!,” Frankfurt
police announced on their Twitter
feed after about four hours of
work removing detonators from
the bomb and two days of clear-
ing a downtown area with a ra-
dius of nearly a mile.
Officials believe the bomb is an
HC 4000, a type dropped by Brit-
ain’s Royal Air Force during the
war, and also known as a “block-
buster” bomb.
The bomb was discovered on
Tuesday at a construction site
near Frankfurt’s Goethe University.
—William Boston
SPACE FLIGHT
U.S. Astronaut Breaks
Endurance Record
Astronaut Peggy Whitson re-
turned to Earth, wrapping up a
record-breaking flight that cata-
pulted her to first place for U.S.
space endurance. Ms. Whitson’s
665 days off the planet—288
days on this mission alone—ex-
ceeds that of any other Ameri-
can and any other woman
world-wide.
She checked out of the inter-
national space station just hours
earlier, along with another Amer-
ican and a Russian. Their Soyuz
capsule landed in Kazakhstan af-
ter sunrise Sunday. Besides du-
ration, Ms. Whitson set other re-
cords, including world’s oldest
spacewoman, at age 57.
—Associate Press
 For personal non-commercial use only. Do not edit or alter. Reproductions not permitted.
To reprint or license content, please contact our reprints and licensing department at +1 800-843-0008 or www.djreprints.com
A4 | Monday, September 4, 2017
U.S. to Add Patrols in Disputed Waters
Schedule of naval
patrols is set for first
time to counter China
maritime claims
BY GORDON LUBOLD
AND JEREMY PAGE
WASHINGTON—The Penta-
gon for the first time has set a
schedule of naval patrols in
the South China Sea in an at-
tempt to create a more consis-
tent posture to counter
China’s maritime claims there,
injecting a new complication
into increasingly uneasy rela-
tions between the two powers.
The U.S. Pacific Command
has developed a plan to conduct
so-called freedom-of-navigation
operations two to three times
over the next few months, ac-
cording to several U.S. officials,
reinforcing the U.S. challenge to
what it sees as excessive Chi-
nese maritime claims in the dis-
puted South China Sea. Beijing
claims sovereignty over all
South China Sea islands and
their adjacent waters.
The plan marks a signifi-
cant departure from such mil-
itary operations in the region
during the Obama administra-
tion, when officials sometimes
struggled with when, how and
where to conduct those pa-
trols. They were canceled or
postponed based on other po-
Pyongyang’s New KOREA
Threat: Cripple
U.S. Electric Grid
BY PETER LANDERS
North Korea’s threats
against the U.S. now include a
tactic long discussed by some
experts: an electromagnetic
pulse, or EMP, triggered by a
nuclear weapon that would
aim to shut down the U.S.
electricity grid.
North Korea’s state news
agency made a rare reference
to the tactic in a Sunday
morning release in which the
country said it was able to
load a hydrogen bomb onto a
long-range missile. The bomb,
North Korea said, “is a multi-
functional thermonuclear nuke
with great destructive power
which can be detonated even
at high altitudes for super-
powerful EMP attack.”
The idea of an EMP attack
is to detonate a nuclear
weapon tens or hundreds of
miles above the earth with
the aim of knocking out
power in much of the U.S.
Unlike the U.S. atomic bombs
dropped over Hiroshima and
Nagasaki in 1945, such a
weapon wouldn’t directly de-
stroy buildings or kill people.
Instead, electromagnetic
waves from the nuclear ex-
plosion would generate
pulses to overwhelm the elec-
tric grid and electronic de-
vices in the same way a light-
ning surge can destroy
equipment.
In a worst-case scenario, the
outages could last for months,
indirectly costing many lives,
since hospitals would be with-
out power, emergency services
couldn’t function normally, and
people could run short of food
and water.
Warnings about the threat
have percolated for many
years, including in a 2008 re-
port commissioned by Con-
gress that warned an EMP at-
tack could bring “widespread
and long lasting disruption
and damage to the critical in-
frastructures that underpin
the fabric of U.S. society.”
When the U.S. tested a hy-
drogen bomb in the Pacific in
YONHAP NEWS/NEWSCOM/ZUMA PRESS
North Korean leader Kim, left, meets with party officials.
litical factors after what some
U.S. officials said were con-
tentious internal debates.
The idea behind setting a
schedule contrasts with the
more ad hoc approach to con-
ducting freedom-of-navigation
operations, known as “fon-
ops” in military parlance, and
establish more regularity in
the patrols. Doing so may help
blunt Beijing’s argument that
the patrols amount to a desta-
bilizing provocation each time
they occur, U.S. officials said.
Chinese officials didn’t re-
spond to a request for com-
ment on the latest U.S. plans.
Beijing has accused the U.S. of
militarizing navigation in the
region by conducting military
patrols. There have been three
navigation patrols so far un-
der President Donald Trump;
there were four during the
Obama administration, ac-
cording to the Congressional
Research Service.
Officials described the new
plan as a more predetermined
way of conducting such patrols
than in the past, though not
immutable. The plan is in keep-
ing with the Trump adminis-
tration’s approach to military
operations, which relies on giv-
ing commanders leeway to de-
termine the U.S. posture. In
keeping with policies against
announcing military operations
before they occur, officials de-
clined to disclose where and
1962, it resulted in lights
burning out in Honolulu,
nearly 1,000 miles away. Natu-
rally occurring electromag-
netic events on the sun can
also disrupt power systems. A
1989 blackout in Quebec came
days after powerful explosions
on the sun expelled a cloud of
charged particles that struck
earth’s magnetic field.
Skeptics generally acknowl-
edge that an EMP attack
would be possible in theory,
but they say the danger is ex-
aggerated because it would be
difficult for an enemy to cali-
brate the attack to deliver
maximum damage to the grid.
The 1962 U.S. nuclear test,
which involved a bomb with a
force of 1.4 megatons, didn’t
disrupt telephone or radio ser-
vice in Hawaii, although those
who stress the threat say to-
day’s electronic devices are
much more vulnerable. North
Korea said its hydrogen bomb
had the explosive power of
tens of kilotons to hundreds of
kilotons.
Others say that even if
North Korea had the technical
capability to deliver a damag-
ing electromagnetic pulse, it
wouldn’t make strategic
sense to use it because
Pyongyang could wreak more
destruction with a traditional
nuclear attack directed at a
large city.
Still, now that North Korea
is specifically threatening an
EMP attack, further attention
is likely to be given to how
the damage might be mini-
mized. One way would be to
bolster missile defenses with
the aim of blowing up any
North Korean nuclear bomb
before it could do damage.
Others said defenses could
be bolstered at less expense
by designing electrical-grid
components to withstand
sudden pulses, just as the
grid already is protected
against lightning strikes, and
building backup systems that
could step in for the princi-
pal electrical grids in an
emergency.
HK JP KO ML
WORLD NEWS
Troubled Waters
The U.S. military is planning a series of scheduled operations through
the South China Sea to challenge Chinese maritime claims. The
patrols have been conducted on an ad hoc basis since 2015.
Operations under: Obama*
VIETNAM
Hanoi
LAOS
THAILAND
Bangkok
CAMBODIA
Ho Chi
Minh City
CHINA’S
‘NINE-DASH LINE’
MARITIME CLAIM
MAL.
Kuala Lumpur
SINGAPORE
Source: Congressional Research Service
when they would occur.
The added military pres-
sure on China comes while
the U.S. is seeking greater co-
operation from Beijing in
reining in North Korea’s nu-
clear weapons and missile
Continued from Page One
the North Korea crisis, which is
shaping up as Mr. Trump’s big-
gest foreign-policy challenge.
“North Korea is trying to
drive a wedge between the
United States and South Korea.
Killing the free-trade agree-
ment would make that a much
easier goal,” said Jon Wolfst-
hal, a fellow at Harvard Uni-
versity’s Belfer Center for Sci-
ence and International Affairs.
With North Korea’s capabil-
ities steadily advancing, “this
would seem the worst time to
engage in economic warfare
with a close ally,” said Mr.
Wolfsthal, who was senior di-
rector for arms control and
nonproliferation at the Na-
tional Security Council during
the Obama administration.
While Trump aides con-
firmed over the weekend that
the administration was seri-
ously weighing a Korus pull-
out, they said no decision had
been made. Some people
briefed on administration dis-
cussions said they felt it was
intended to press Seoul to of-
fer fresh concessions.
The threat to pull out of a
key Asian trade deal exacer-
bates concerns about U.S. en-
gagement in the region, stoked
when Mr. Trump in January
pulled out of the Trans-Pacific
Partnership pact with 11 other
Asian and Pacific economies.
It also is likely to heighten
TEST
Continued from Page One
tember 2016, which the USGS
said had a magnitude of 5.3.
The latest nuclear test was
estimated to have a yield of as
high as 100 kilotons—about 10
times the power of the North’s
previous test and roughly five
times that of the atomic bomb
that the U.S. dropped on Naga-
saki, Japan, in 1945, according
to Kim Young-woo, a South Ko-
rean lawmaker who is chairman
of the legislature’s defense com-
mittee and received a briefing
from military authorities.
A spokesman for the Defense
Ministry declined to comment.
Norsar, a Norwegian non-
profit foundation with a focus
on seismology, estimated the
explosive yield at 120 kilotons,
based on a 5.8-magnitude as-
sessment of the explosion.
South Korea’s national security
adviser, Chung Eui-yong, said
after a 90-minute emergency
meeting of the National Secu-
rity Council that Seoul would
consider the possible deploy-
ment of what he described as
the “most powerful strategic
assets that the U.S. possesses,”
without elaborating, according
to a statement from the presi-
dential Blue House. “Strategic
assets” typically refers to
stealth bombers, aircraft carri-
ers or nuclear weapons. The
U.S. withdrew its nuclear weap-
ons from South Korea in 1991.
Mr. Chung, who spoke by
phone with Lt. Gen. H.R. Mc-
SI IN UK FR MN PR THE WALL STREET JOURNAL.
In a new facet, some free-
dom-of-navigation patrols
may be “multi-domain” pa-
trols, using not only U.S. Navy
warships but U.S. mili-
tary aircraft as well.
Trump 200 miles Thus far, there have been
200 km three publicly disclosed free-
CHINA dom-of-navigation operations
under the Trump administra-
Taipei tion. The last one was con-
Guangzhou TA I WA N ducted on Aug. 10 by the navy
destroyer, the USS John S.
Hong Kong Ph ilip p in e
Se a McCain, which days later col-
lided with a cargo ship, killing
10 sailors. That patrol around
PARACEL
ISLANDS Mischief Reef—one of seven
fortified artificial islands that
Beijing has built in the past
So u t h
Manila three years in the disputed
C h in a Se a Spratlys archipelago—also in-
cluded an air component.
According to U.S. officials,
PHILIPPINES two P-8 Poseidon reconnais-
sance aircraft flew above the
McCain in a part of the opera-
SPRATLY tion that hadn’t been previ-
ISLANDS
ously disclosed. More naviga-
tion patrols using warships
BRUNEI
likely now will include aircraft
C e le be s Se a
overhead, they said.
M A L AY S I A
Pacific Command officials
INDONESIA
*Since 2015 had no comment on the matter.
THE WALL STREET JOURNAL. The first such patrol under
Mr. Trump was conducted by
program. The Trump adminis- the destroyer USS Dewey May
tration has complained that 24 around Mischief Reef. In
Beijing hasn’t done all it can July, the guided-missile de-
to pressure its allies in Pyong- stroyer USS Stethem con-
yang not to develop weapons ducted a patrol near Triton Is-
or threaten the U.S. and its land in the Paracel Island
territories and allies. chain in the South China Sea,
South Korean President Moon Jae-in arrives for a national security meeting Sunday in Seoul.
concerns in Seoul that the U.S. to Twitter to lambaste Mr.
doesn’t see South Korea as in- Moon’s conciliatory approach
strumental in the region. toward North Korea, which
Underscoring those con- emphasized dialogue and eco-
cerns, Mr. Trump spoke with nomic cooperation with
Japanese Prime Minister Pyongyang, calling it “ap-
Shinzo Abe on Sunday—the peasement.”
third talk between the leaders South Korea’s presidential
since North Korea’s Tuesday Blue House said Sunday it was
launch of a missile that flew on board with Mr. Trump’s at-
over Japanese territory. Mr. tempts to apply “maximum
Trump has spoken with South sanctions and pressure.”
Korean President Moon Jae-in In recent weeks, Mr. Moon
once in that period. has taken a tougher line on
The U.S. also has yet to North Korea, authorizing fur-
nominate an ambassador to ther deployment of a U.S. mis-
South Korea, while envoys are sile-defense battery and open-
in place in Tokyo and Beijing. ing the door to the
On Sunday, Mr. Trump took reintroduction of U.S. “strate-
Master, his White House coun-
terpart, said that Moon Jae-in,
the South Korean president,
had called for the “strongest
of appeasement with North
Korea will not work, they only
understand one thing!”
While North Korea has
punitive measures” against made steady advances in its
Pyongyang. That includes dip- nuclear and missile programs
lomatic measures and a new over the course of decades, Mr.
United Nations Security Coun- Kim has greatly accelerated
cil resolution to “completely the pace of testing as the iso-
isolate North Korea.” lated country nears the ability
In Sunday morning tweets, to deliver a nuclear-tipped
Mr. Trump said North Korea’s missile to the continental U.S.
“words and actions continue This year alone, it has con-
to be very hostile and danger- ducted a string of missile tests
ous to the United States.” He that have extended the proven
added: “North Korea is a range of its arsenal and intro-
rogue nation which has be- duced new capabilities that al-
come a great threat and em- low Pyongyang to fire missiles
barrassment to China, which more quickly and with less
is trying to help but with little warning. In July, it test-fired
success.” He also added: two ICBMs that experts say
“South Korea is finding, as I they believe are capable of
have told them, that their talk reaching many parts of the
Chain Reaction
North Korea’s six nuclear tests since 2006 have been part of a program to develop nuclear-tipped missiles
that can threaten the U.S. and its allies. Each test has shown some progress towards that goal.
Magnitude of earthquake and estimated yield of explosion:
Oct. 9, 2006 May 25, 2009 Feb. 12, 2013 Jan. 6, 2016
Magnitude: 4.1 4.7 5.1 5.1
Yield of explosion:
Less than 1 kiloton 2-6 kilotons 7 kilotons 7 kilotons
After years of North Korea’s North Korea said North Korea said
multilateral talks to second nuclear after the test it the detonation
roll back its nuclear test was viewed had detonated a was the first test
program, North by experts as “miniaturized and of a hydrogen
Korea exploded a successful. It came lighter” device, bomb. Experts
device in what was soon after suggesting it was said the explosion
viewed as a Pyongyang fired a making progress was too small but
partially successful long-range rocket toward having a may have been
test of a nuclear that landed in the bomb to mount on boosted with
bomb. Pacific Ocean. a long-range missile. hydrogen.
Sources: South Korea Defense Ministry; U.S. Geological Service (magnitude); staff reports;
South Korea and Japan governments (2017 yield estimate)
coming to within 12 nautical
miles of the island.
Together, the moves amount
to a more extensive U.S. pos-
ture in the South China Sea,
where the U.S. has attempted
to counter what it sees as ex-
cessive Chinese claims around
two island chains, the Paracels
and the Spratlys, where Beijing
has conducted reclamation ac-
tivities, building or expanding
islands using sand dredged
from the ocean floor to estab-
lish runways, ports, buildings
and other facilities for military
purposes.
Those structures worry the
U.S. and other nations, which
believe China’s presence there
could impede shipping lanes
through which billions of dol-
lars of cargo transit each year.
The U.S. doesn’t make
claims to any of the islands,
but conducts the patrols to
challenge China’s claims,
which overlap with those of
Vietnam, Malaysia, Brunei,
Taiwan and the Philippines, a
U.S. treaty ally.
Col. Rob Manning, a Penta-
gon spokesman, said U.S.
forces operate throughout the
Asia-Pacific region every day,
including in the South China
Sea. “All operations are con-
ducted in accordance with in-
ternational law and demon-
strate that the United States
will fly, sail and operate wher-
ever international law allows.”
SOUTH KOREAN PRESIDENTIAL BLUE HOUSE/GETTY IMAGES
gic assets” to South Korea—a
phrase that typically refers to
aircraft carriers, stealth bomb-
ers and nuclear weapons.
Even if the Trump adminis-
tration is only threatening
termination as a negotiation
tactic, some Korus advocates
fear the damage to the alli-
ance from Mr. Trump’s criti-
cism of the trade pact could
be lasting.
“There is likely to be a seri-
ous deterioration of the atmo-
sphere with such a termination
notice,” said Jeffrey Jones,
chairman of the board of gov-
ernors at the American Cham-
ber of Commerce in Korea.
U.S. mainland.
“The Kim regime made the
strategic decision to develop a
nuclear armed ICBM that can
strike the United States,” said
Leif-Eric Easley, a professor of
international studies at Ewha
Womans University in Seoul.
“It is in a sprint to deploy that
capability, because it wants
the world to recognize it be-
fore returning to diplomatic
talks, and before sanctions be-
come unbearable.”
Analysts have been divided
on whether North Korea
could shrink a nuclear war-
head to fit on the tip of a
missile. Many also are skepti-
cal about whether a North
Korean warhead can survive
the strain of re-entry into
Earth’s atmosphere.
Sept. 9, 2016 Sept. 3, 2017
5.3 Magnitude: 6.3
Around
10 kilotons 100 kilotons
The fifth nuclear North Korea said
test didn’t appear its latest nuclear
to be big enough test was of a
for a standard hydrogen bomb
hydrogen bomb. that can be
Still, Pyongyang mounted on a
said it was now long-range missile.
able to produce Experts are now
nuclear warheads evaluating those
“at will.” claims.
THE WALL STREET JOURNAL.
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THE WALL STREET JOURNAL. Monday, September 4, 2017 | A5

U.S. NEWS
Rebuilding Plan Shifts Burden to States
BY TED MANN to pay for new bridges and officials about the incentive to cover half the cost of the
roads instead of relying on the plan recently, White House Gateway project, which also
Top advisers crafting Presi- federal government for the Budget Director Mick Mulva- includes bridges and track im-

JOE SOHM/VISIONS OF AMERICA/UIG VIA GETTY IMAGES

dent Donald Trump’s infra- bulk of the funding. ney said he had spoken to a provements.
structure plan say they aim to The administration’s ap- governor who was nearly The White House looks on
upend the way U.S. public proach alarms supporters of ready to begin a $200 million such calls for funding as just
works are financed, shifting some of the biggest planned bridge project, and needed the sort of thing it would like
the bulk of the decision-mak- projects, who say that local just $20 million from the fed- to curtail.
ing and costs to states and cit- cost-sharing and private fi- eral government to complete “There’s no people or eco-
ies and away from Washington. nancing efforts would fall well the financing. nomic activity in that region
The administration is pro- short of making up for sharply “That’s the kind of thing that could possibly cover the
posing $200 billion in new reduced federal funding. that we want to put at the top cost of that?” said the admin-
federal funding as the central Funds for roads, bridges of the list,” he said. istration official, when asked
piece of its $1 trillion plan to and other infrastructure cur- Still uncertain is whether about a recent appeal by Mr.
improve the nation’s infra- rently come from a variety of that approach would work on Cuomo for federal aid for the
structure. President Donald sources, including the Federal projects with much larger project. “I think that’s a tough
Trump frequently cited the Highway Trust Fund and for- price tags. Officials working sell, would be my response.”
need for upgrades on the cam- mula grants that the adminis- Some local officials worry big projects won’t get enough funding. on a proposed new railroad The suggestion that the two
paign trail. tration says it will maintain. tunnel under the Hudson states could pay their own
Most of the $200 billion, The proposed 20-80 split from local government. ties that compete based on River and related improve- way on the project, while not
White House officials say, will of federal to local contribu- The White House wants to how much of the cost they are ments said they were con- a final decision on federal
be parceled out as incentives tions would dramatically change the way states and cit- willing to take on themselves. cerned at the White House’s funding, shocked some tun-
to localities that raise their change parts of the current ies approach the pools of fed- “If we’re putting in a dollar, refusal so far to commit to a nel’s advocates.
own funding for building proj- system. Though funding levels eral capital that are used to we want a state or a locality to large share of the more than “You’re just not going to be
ects, with the aim of reaching vary, the federal government initiate large projects, saying have ideally four dollars that $29 billion cost. able to raise the level of fund-
the administration’s overall generally pays about 80% of Washington can encourage lo- they’re putting in,” the senior Republican New Jersey Gov. ing that’s necessary” without
goal. Cities and states could highway projects and up to cal governments to make White House official said. Chris Christie and Democratic federal support, Amtrak Co-
turn to private-sector financ- 90% of projects at airports, smarter investments by “This gets us to the trillion.” New York Gov. Andrew Cuomo Chief Executive Richard An-
ing or levying tolls and taxes with the remainder coming awarding grants to communi- Talking to local-government have said they expect the U.S. derson said.

ECONOMIC
Low Wage Growth Poses Challenge to Fed CALENDAR
BY ERIC MORATH This week’s economic calendar
AND NICK TIMIRAOS Tight Labor Market Eases Disparities features U.S. trade and productiv-
ity data, a European Central Bank
An extended run of labor The gaps are still sizeable and the monthly figures are volatile, but the larger trend is clear: as the labor market tightens, black and policy meeting, and Chinese for-
market gains this year has pro- Hispanic unemployment rates are falling and minorities are coming off the sidelines. eign-exchange and trade figures.
duced little acceleration in Unemployment rate Labor-force participation rate WEDNESDAY: The U.S. Com-
wage growth or inflation, un- 12 pct. points above average 4 pct. points above average merce Department releases its
derscoring a puzzle that com- July international trade report.
plicates Federal Reserve policy 10 3 The trade gap narrowed sharply
decisions looming in the Darker line shows in June, as a strengthening
8 2
months ahead. 12-month average global economy pushed up de-
Black
Nonfarm payrolls rose a 6 1 mand for American exports. The
seasonally adjusted 156,000 in 4 Hispanic 0 deficit with other nations con-
August, a modest slowdown tracted 5.9% from a month ear-
from the prior two months, 2 White -1 lier to $43.64 billion.
the Labor Department said 0 Overall -2 THURSDAY: European Central
Friday. The unemployment baseline Bank officials gathering in Frank-
rate ticked up from a 16- –2 -3 furt could discuss a key topic for
Asian
year low to 4.4% and wages –4 -4 investors: How to wind down
failed to break out, rising 2.5% the ECB’s giant bond-buying pro-
1980 ’90 2000 ’10 1980 ’90 2000 ’10
from a year earlier for the gram, known as quantitative
fifth straight month. But these recent gains won’t restore the opportunities black and Hispanic workers lost due to their unusually high unemployment rates easing, which is due to run
“The economy is doing well, and higher exposure to occupations that were hammered by the 2007-09 recession. through December.
but it’s not necessarily taking China releases data on for-
off,” said Laura Rosner, senior Cumulative work weeks lost since the recession began, calculated based on the difference Share of the workforce in occupations such eign-exchange reserves. Valua-
economist at Macro Policy between each group’s unemployment rates and the national average as manufacturing and construction which tion impacts on reserve assets
Perspectives. “We’re on an haven’t recovered from the recession from a weakening U.S. dollar and
Black Hispanic
even keel. The labor market When unemployment hit its postrecession high eased capital outflow pressure
continues to hum along.” 25 full-time weeks 25 full-time weeks should have boosted the size of
The August hiring report Through August 2017 the largest stockpile of foreign
Potential work lost per
won’t change the Fed’s imme- 20 20 currency for a seventh straight
person, since the
diate plans. The Fed is widely recession began Asian month. Economists expect re-
expected to initiate the slow serves edged up to $3.1 trillion
runoff of its $4.5 trillion port- 15 15 at the end of August, from
folio of bonds and other assets How much White $3.081 trillion at the end of July.
at its Sept. 19-20 policy meet- 10 would have 10 The U.S. Labor Department
ing. been lost if the gap releases revised data on second-
hadn’t expanded Black
But the report deepens a quarter productivity and costs.
5 5
debate inside the Fed about FRIDAY: China releases trade
how to respond to soft wage The baseline is the data. Economists forecast that
national average Hispanic
and inflation pressures. This 0 0 exports rose about 6% from a
dilemma could complicate how 2008 ’09 ’10 ’11 ’12 ’13 ’14 ’15 ’16 ’17 2008 ’09 ’10 ’11 ’12 ’13 ’14 ’15 ’16 ’17 0% 10 20 30 40 50 60 70 80 year earlier in August, moderat-
aggressively the Fed should Notes: All figures other than occupations are seasonally adjusted. Hispanic refers to all those of Hispanic origin, and includes people who may also be included in white and other categories. This
ing from July’s 7.2% growth,
proceed with interest-rate in- is done to allow maximum historical comparisons. Data for Asian Americans isn’t available prior to 2003. Occupational data is based on the change from May 2007’s unemployment low point. while imports likely climbed 10%,
creases. Source: Labor Department THE WALL STREET JOURNAL down from July’s 11% increase.

Both Sides Press Trump on ‘Dreamers’ President Drafted

BY LAURA MECKLER Letter on FBI Firing
WASHINGTON—President BY PETER NICHOLAS dency, underscored by conver-
Donald Trump is set to an- AND MICHAEL C. BENDER sations with some foreign
nounce a decision Tuesday on leaders who would bring up
whether to retain an Obama- The weekend before he the Russia probe, according to
era program that protects fired FBI Director James the administration official.
young undocumented immi- Comey, President Donald The president wrote the four-
grants from deportation, amid Trump drafted a letter to him page letter with the help of a
FREDERIC J. BROWN/AGENCE FRANCE-PRESSE/GETTY IMAGES

pressure from House Speaker laying out the reasons why he senior White House aide, Ste-
Paul Ryan and other Republi- didn’t want him to stay in the phen Miller.
cans to keep it. job, a senior administration Ultimately, the letter was
Mr. Ryan and other Republi- official said Friday. never sent to Mr. Comey. Mr.
cans promised to push for leg- Mr. Trump, who worked on Trump instead shared the
islation to protect them if he the draft at his golf club in draft with various White
doesn’t, setting up a possible Bedminster, N.J., in early May, House aides and gave it to top
fall legislative fight. wanted Mr. Comey to publicly Justice Department officials in
Asked in an Oval Office ap- state the president wasn’t per- a meeting at the White House
pearance Friday if the young sonally under investigation in on May 8, the official said.
immigrants, known as Dream- connection to Russia’s alleged The next day, Mr. Trump
ers, should be worried, the meddling in the 2016 presi- sent Mr. Comey a four-para-
GOP president said: “We love dential election—an assurance graph letter telling him he had
the Dreamers. We think the Mr. Comey had previously been fired, invoking letters he
Dreamers are terrific.” given the president privately, had received from the Justice
Immigration hard-liners in- Supporters of young immigrants brought to the U.S. as children attend a rally in Los Angeles. a person familiar with the Department leadership citing
side his administration have matter said. their belief that Mr. Comey had
been urging Mr. Trump to kill brought here by their parents the issue set Tuesday as the the president. Paraphrasing the letter, the damaged the FBI’s credibility
the program, and 10 states are and don’t know another home. deadline for him to make a de- “It is time for President administration official said Mr. during an investigation of for-
threatening to sue him if he And so I really do believe there cision, and anticipation has run Trump to stop breaking one of Trump wanted this message mer Secretary of State Hillary
doesn’t. needs to be a legislative solu- high as that date approaches. the clearest campaign prom- sent: “You’ve told me three Clinton’s email practices.
Pressure to keep it came tion,” Mr. Ryan told WCLO ra- The threat originally came ises he made,” Mr. Beck said. times I’m not under investiga- Last month, with the White
from Mr. Ryan and other Re- dio in his hometown of Janes- from 11 states, but on Friday, If Mr. Trump does kill the tion but you won’t tell the House’s consent, the Justice
publicans, as well as from U.S. ville, Wis. Tennessee’s Republican attor- program, attention would im- world, and it’s hampering the Department turned over the
corporations and the young The program was created in ney general, Herbert H. Slatery mediately turn to Congress. country.” draft letter to Mr. Mueller, two
people themselves, who have 2012 by Mr. Obama, offering III, pulled out of the group and The bipartisan Dream Act Mr. Comey, testifying be- administration officials said.
become a potent political force. young people brought to the instead urged Congress to pass has been pending for many fore the Senate Intelligence The New York Times reported
Mr. Ryan said Friday that U.S. as children a reprieve from Dream Act legislation. In a let- years, but has always had more Committee in June, confirmed on the letter Friday.
former President Barack deportation and work permits. ter to Tennessee’s GOP sena- Democrats than Republicans that during his stint at the One part of Mr. Mueller’s
Obama, a Democrat, was Since then, nearly 800,000 tors, he said, “There is a hu- supporting it. Now several Re- Federal Bureau of Investiga- probe is whether the president
wrong to create the program, people have enrolled. Mr. man element to this…that is publicans are urging action. tion, Mr. Trump wasn’t under obstructed justice in firing Mr.
called Deferred Action for Obama and his advisers have not lost on me and should not Sen. Orrin Hatch (R., Utah) investigation. The president’s Comey.
Childhood Arrivals, using exec- defended the program as a le- be ignored.” said in a statement Friday that actions—including firing Mr. The administration official
utive authority but that Mr. gitimate exercise of executive The program’s opponents he urged Mr. Trump not to re- Comey—are now being exam- said nothing in the letter sug-
Trump shouldn’t kill it. Mr. authority. maintain Mr. Trump must end scind the program and said he ined by Special Counsel Rob- gests the president wanted to
Ryan said he would push legis- Mr. Trump opposed the pro- it to keep his word to voters. would work on legislation to ert Mueller, who took over the scuttle the entire Russia inves-
lation to protect young undoc- gram as a candidate but has al- Roy Beck, president of Num- give these young people legal Russia probe after Mr. Comey tigation, which is also examin-
umented immigrants if they lowed it to continue and said bers USA, an advocacy group status, along with other was fired on May 9. ing foreign hacks of political
lose administrative protec- the issue is a difficult one for that seeks to reduce both legal changes to the immigration Mr. Trump, a Republican, parties and the spread of false
tions. him. and illegal immigration, said system. sought to take action because news stories damaging to Mrs.
“These are kids who know The 10 states threatening to the group was mobilizing its —Kristina Peterson he saw the lingering investiga- Clinton, the 2016 Democratic
no other country, who were sue the administration over members to put pressure on contributed to this article. tion as a weight on his presi- presidential nominee.
For personal non-commercial use only. Do not edit or alter. Reproductions not permitted.
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A6 | Monday, September 4, 2017
FLOOD
Continued from Page One
near Brays Bayou, one of the
swampy waterways that
course through the city and
serve as the primary conduits
to carry runoff to the Gulf of
Mexico. Many in the swollen
bayou’s path are now ponder-
ing the same question: Is it
time to leave for good?
Known as the Bayou City,
Houston has long favored
rapid development and main-
taining a low cost of living. It
doesn’t have a formal zoning
code, which some cities use to
force builders to incorporate
flood-management measures.
Large-scale planning is com-
plicated by the city’s sprawl-
ing 10,000-square-mile metro
area, nearly the size of Massa-
chusetts, home to almost
seven million people.
Houston and Harris
County, where it is located,
have passed referendums to
fund drainage projects,
moved to widen waterways,
boosted deed restrictions and
planning regulations, and
even required new houses in
certain areas such as Meyer-
land to be built to withstand
rising water.
Some of the measures have
worked. But it hasn’t been
enough.
“They’ve been playing catch
up,” said Philip Bedient, an en-
gineering professor and flood-
ing expert at Rice University
in Houston. “It’s all sorry, a
day late and a dollar short.”
In London, massive flood
gates on the Thames can rise
during a storm surge and
hold back water. New York
City has spent years deliber-
ating whether to follow Lon-
don’s lead and build storm
barriers for the Hudson and
East rivers.
From Florida to the Nether-
lands, deep water catchment
systems paired with storm
water pumps allow flat areas
to withstand drenching rains
by slowly releasing the water
over time to prevent floods.
The Houston area doesn’t
have pumps.
New Orleans had storm wa-
ter pumps before Hurricane
Katrina, although the anti-
flooding safeguards were de-
stroyed when levees broke,
killing about 1,400 of the total
of more than 1,800 who died
from the storm, and showing
the perils of underfunding
critical infrastructure.
Houston’s disaster will in-
tensify a debate that is al-
ready upending insurance
markets and worrying federal
officials, whose coffers are in-
creasingly tapped to pay for
calamities. The U.S. has seen
20 storms causing a billion
dollars or more in damage
since 2010, not including Har-
vey, compared with nine bil-
lion-dollar floods in the full
decade of the 1980s, accord-
ing to inflation-adjusted esti-
mates from the National Oce-
anic and Atmospheric
Administration.
One option for preventing
future superfloods would be
radical reconstruction, a move
that would likely force the
government into battles with
private property owners. After
Katrina, Louisiana officials
tried to tell flooded home-
owners not to rebuild in some
areas, but the instructions
were ignored.
In the case of Meyerland,
Mr. Bedient said the govern-
ment should buy out thrice-
flooded homeowners and use
the land to create more de-
tention ponds and widen
storm channels.
Farther upstream, at least
three new reservoirs should
be constructed west of Hous-
ton, and the existing two res-
ervoirs, which were built in
the 1940s and which engi-
neers say could be at risk of
Catastrophe adjuster Ian Richardson spoke to Ian Hartman, right, on Thursday at his Meyerland home.
Flood-damaged furniture, floors and sheet rock heaped along the sidewalk in Meyerland. The tight-knit neighborhood along Brays Bayou on Houston’s southwest side
has been flooded three years in a row. An image on Chris Bisel’s phone, below, showed water from the Memorial Day Flood in 2015 inside his house.
failing, should be upgraded,
he said.
That said, Houston’s flat
landscape and hardpan clay
makes it nearly impossible to
absorb intense rainfall the way
geographies with sandier soil
do. And 50 inches of rain
would swamp virtually any
U.S. city.
“It was an outrageous
storm event,” he said. “We’ve
never seen anything like this.”
Houston Mayor Sylvester
Turner rejected the notion
that the city’s flood-control ef-
forts and approach to zoning
and planning were to blame.
“You cannot significantly miti-
gate flooding and drainage on
the cheap,” the mayor said.
“And a lot of people don’t
want to pay, but you’re going
to pay sooner or later.”
Meyerland, built on former
rice fields, has for decades
served as the center of Jewish
life in Houston, a place where
families who felt unwelcome
elsewhere due to their reli-
gion forged a community of
their own.
Today, Meyerland remains
one of Houston’s most desir-
able family neighborhoods,
with high-performing public
schools and lush parks. It is
increasingly diverse, like
much of the city—one of
America’s most ethnically
multifaceted places, with im-
migrants who speak more
than 140 languages.
Mr. Bisel, who owns a
hearing-aid business in Mey-
HARVEY’S AFTERMATH
erland, bought his current
home three weeks before
Tropical Storm Allison, the
plodding 2001 rainstorm that
until Harvey served as the
high-water mark for modern
Houston flooding.
The house took in about 10
inches of water then. Like
most Houstonians, Mr. Bisel
thought that was a once-in-a-
lifetime event, until it hap-
pened in 2015, 2016 and
again last week.
After the 2015 flood, which
took place around Memorial
Day and poured 34 inches of
water into his house, he was
among several dozen residents
approved to receive federal
grant funds aimed at reducing
repeat flood insurance
claims by tunneling under
homes and raising them on
pillars.
Since the government is
likely to have to pay for cata-
strophic flood damage any-
way, the Federal Emergency
Management Agency has
sought to pay to shore up
homes against flooding in-
stead of the $350,000 it can
cost to rebuild them.
Mr. Bisel was hopeful his
home could be raised before
the next big flood. But the
construction faced chronic de-
lays, he said. After living in
one second-floor room with
his wife, two children and a
dog for nearly a year during
renovations, he settled back
into the full home in April
2016 after most of the rebuild-
ing work was completed,
while he waited along with
about 40 others for their
houses to be raised.
Less than two weeks later,
another storm, dubbed the
Tax Day Flood, inundated his
house with 20 inches. He
pressed the city to move more
quickly.
This July, the Houston City
Council approved the elevation
plans for the first batch of
homes being raised with
FEMA money. But Mr. Bisel
was in the second batch,
14th on the list. As he saw the
forecast for Harvey, he feared
he had run out of time. Mr. Bi-
‘This is my home…
where I grew up, and it
didn’t used to be this
way,’ Mr. Bisel said.
sel, his wife and son went
through the now-familiar rit-
ual of moving their furniture
and treasured belongings to
higher ground.
By the time Harvey was
done dumping trillions of gal-
lons over the Houston area,
forcing his wife to escape in a
kayak, his home had taken on
55 inches of water. That would
have been 5 inches short of his
first floor if his house had
been raised. Neighbors who
had elevated their homes ear-
lier with their own money
stayed dry.
More than 700,000 people
live near Brays Bayou, which
meanders through Meyerland,
draining 127 square miles
around it. A $500 million city
project aimed at reducing
flooding was under way on an-
other part of the bayou when
Harvey hit.
Lined with hiking and bik-
ing trails, the waterway winds
past many areas that have
seen rapid urbanization, in-
cluding NRG Stadium, where
the Houston Texans play; the
Texas Medical Center, the
largest collection of hospitals
and health-care research in-
stitutions in the world; and
Beth Israel, the oldest syna-
gogue in Texas.
Beth Israel, which sits
across the street from the
bayou, began taking on wa-
Repeat Floods
Houston's Meyerland neighborhood has been hit by three major
floods in the past three years, after years of relatively minor flooding.
Rain as measured at a gauge on the Brays Bayou in Meyerland
40 inches
35 Total monthly
rainfall
30
25
20
15
Memorial Day floods
10
5
0
2012 ’13
Source: Harris County Flood Control District
ter Aug. 27 for the third
time in three years. When
Rabbi David Lyon walked into
the sanctuary the follow-
ing morning, he said he took a
long look around and began
to weep. About 3 feet of
floodwater had risen to the
platform where he gives his
sermons.
The synagogue, which dates
to the 1850s, has been at its
Meyerland location since 1968.
A staple of the community, it
never flooded before
2015. After Harvey, cleanup
crews and volunteers on
Wednesday cleared floodwater
with heavy equipment. The
synagogue’s Torahs had been
safely carried to higher
ground inside the building in
advance of the storm.
Following the 2015 floods,
the synagogue laid plans to in-
stall new carpets and re-wall-
paper, and began consulting
with waterproofing experts. It
put off a $300,000 remodel
until November of 2016, ner-
vous about more flooding.
Rabbi Lyon said he realizes
that the question of whether
Beth Israel should move is
now likely “in the back of peo-
ple’s minds.”
“There are people who say
‘Why do you stay in Meyer-
land?’ ” he said. “The reality
is, where we’re located is a
very central Jewish address.
Many people centralize their
life around this area.”
More pointedly, he noted
that people had settled here
long before the flooding prob-
lems started.
“Families have every right
to say, ‘We chose these homes
not yesterday, but years and
years ago,’ ” said Rabbi Lyon,
54. “What’s different? What
changed?”
Farther along the
bayou, Natalie Hausman-Weiss
surveyed the history of her
family as it was splayed out in
tatters across her Meyerland
backyard.
There were the loose pages
from her husband’s baby al-
bum. There were the booklets
of Hebrew school lessons her
two sons had used. There were
her husband’s dress shirts
dangling from hangers. Some-
how, the Fleetwood Mac and
Sting records had stayed dry.
When the rising waters of
Brays Bayou hemmed in their
one-story ranch home, her
younger son, Samuel, 15,
waded over to an empty two-
story home for sale next door
and smashed a window with a
hammer so they could all
clamber inside.
The family and six others
from the neighborhood hud-
THE WALL STREET JOURNAL.
ANNIE MULLIGAN FOR THE WALL STREET JOURNAL (3)
Rainfall during period
of major flooding
Tropical Storm Harvey
Tax Day floods
’14 ’15 ’16 ’17
THE WALL STREET JOURNAL.
dled on the house’s second
floor until they were rescued
by boat.
Ms. Hausman-Weiss, 49,
had moved to Houston from
Birmingham, Ala., in 2011, and
got a job as director of a non-
profit that takes disabled chil-
dren into the outdoors. As Re-
form Jews, the family had
been drawn to Meyerland and
loved the Jewish life here.
They had initially been un-
der contract to buy a spacious
family home near the bayou,
but pulled out at the last min-
ute when they learned it had
flooded three times. They
were told the home they even-
tually bought had never taken
on water.
But three months after
they moved in, a small
amount of rain caused water
to pool up from the floor.
They quickly spent $30,000 on
upgrades for protection in-
cluding new gutters, French
drains beneath the windows
and waterproofing for bricks
on the chimney.
When the bayou overflowed
its banks during the Memorial
Day Flood of 2015, water came
in again, this time an inch
high. The family replaced the
floors and portions of the
walls from 4 feet down, cost-
ing them roughly $70,000,
much of which was covered by
their flood insurance. But the
experts called that flood an
anomaly, so surely nothing
similar would happen again,
Ms. Hausman-Weiss remem-
bered thinking.
After Harvey, the bayou
swamped their home with 3
feet of water.
When they returned Aug.
27, “It looked like a war zone.
Brown muck everywhere,” she
said. “We’ve been through a
lot in our lives. And I know
this is just stuff. But this
is our stuff.”
They family already had the
maximum amount of flood in-
surance made available by
FEMA’s National Flood Insur-
ance Program, she said. But to
do any further renovations,
they would likely have to
spend $200,000 to raise the
house—money they didn’t
have. And who would buy it
now, she said.
For now, the family is stay-
ing in a two-bedroom home
owned by a friend. But eventu-
ally, they will have to return to
Meyerland, and somehow
reckon with their damaged
home. Amid all the uncer-
tainty about the future, there
was one thing of which she
was sure.
“It’s going to flood again,”
she said.
 For personal non-commercial use only. Do not edit or alter. Reproductions not permitted.
To reprint or license content, please contact our reprints and licensing department at +1 800-843-0008 or www.djreprints.com
THE WALL STREET JOURNAL.
Trump Returns to Devastated Gulf Coast
BY JOSEPH DE AVILA
AND QUINT FORGEY
LAKE CHARLES, La.—Presi-
dent Donald Trump visited
Texas for his second trip to
the devastated Gulf Coast, as
rescues continued amid flood-
waters that were still rising in
some areas.
The president and first lady
Melania Trump traveled to
Louisiana Saturday after they
met flood survivors and volun-
teers in Houston.
The two joined Texas Gov.
Greg Abbott at the NRG con-
vention center, which has been
serving as one of Houston’s
main shelters, as the president
posed for photos, greeted vic-
tims and spoke with children
playing games.
“The message is that things
are working out well,” Mr.
Trump said. “Really, I think
people appreciate what’s been
done. It’s been done very effi-
ciently, very well, and that’s
SCOTT OLSON/GETTY IMAGES
The storm appears poised to transform a rental market from one where supply exceeded demand to the other way around, both for high-end and low-end properties.
Houston’s Glut of Rental Housing Vanishes
BY LAURA KUSISTO
AND VALERIE BAUERLEIN
HOUSTON—Not even two
weeks ago, this city had one of
the weakest apartment mar-
kets in the country with tens
of thousands of vacant units.
Now landlords say prospective
renters are lining up outside
their doors and some have al-
most no units left.
Before the storm, Atlanta-
based Gables Residential,
which owns about 3,500 units
in the Houston area, had a
couple of hundred vacant
units. Gables received requests
for 2,500 units from 50 differ-
ent companies, including en-
ergy firms, looking for fur-
nished apartments for local
workers and insurance adjust-
ers who may need to bring
workers in. It suspended its
online leasing to avoid renting
out units that had already
been booked online.
“It is going to fundamen-
tally change the housing mar-
ket in Texas for a while,” said
Cris Sullivan, Gables’ chief op-
erating officer.
Hurricane Harvey, which
dropped record amounts of
rain in parts of the region,
poses unique housing chal-
lenges because it affected a
much larger swath of Hous-
City Asks for Help With Environmental Testing
BY MELANIE EVANS
Houston needs help moni-
toring the threat of toxic pol-
lution to the city’s water, soil
and air from Tropical Storm
Harvey’s destructive flooding,
a city Health Department offi-
cial said.
The city Health Department
has two employees to rou-
tinely test the city’s water-
ways, but that is not enough
to quickly monitor the storm’s
effects across Houston’s vast
network of bayous, said Loren
Raun, chief environmental sci-
ence officer for the Houston
what we want. We’re very
happy with the way everything
is going. There’s a lot of love.”
The visit came a day after
Mr. Trump asked Congress
for $7.9 billion for the first
round of relief from a disas-
ter that has killed dozens of
people, displaced tens of
thousands, inundated hun-
dreds of thousands of homes
and required thousands of
rescues. Mr. Abbott has said
the state may need more than
$125 billion in aid.
The White House said that
it would make additional di-
saster assistance available to
Texas for debris removal and
emergency protective mea-
sures. Mr. Trump authorized
increased cost sharing to 90%
for federal funding for debris
removal and 100% federal
funding for emergency protec-
tive measures. Mr. Trump’s
original disaster declaration
on Aug. 25 permitted 75% for
federal cost sharing.
ton’s population than had been
impacted by previous storms.
The White House said 100,000
homes in total were affected
in Texas and Louisiana. In
Houston, neighborhoods
flooded that have never
flooded before, places where
many people don’t have flood
insurance, which is likely to
make the recovery longer.
Finding housing for victims
displaced by the disaster will
be a major challenge for this
metro area of 6.7 million. In
Houston, many of the units
that were vacant before the
storm were in luxury high-rise
buildings, a legacy of the
Flooding Updates
Forge Unlikely Star
Move over, Beyoncé, Hous-
ton has a new celebrity: Jeff
Lindner, meteorologist for the
Harris County Flood Control
District.
As Tropical Storm Harvey
inundated the greater Houston
area with as much as 51 inches
of rain over the past week, Mr.
Lindner, 35 years old, has been
a reassuring voice in a near-
apocalyptic disaster, calmly up-
Health Department in an in-
terview Saturday.
“It’s too big of a problem,”
she said. “We really need to be
sampling everywhere.”
Houston is a major hub for
petroleum and chemical man-
ufacturing and is home to
eight Superfund sites, accord-
ing to the U.S. Environmental
Protection Agency. Ms. Raun
said she asked the EPA on Fri-
day for help testing the city’s
Superfund sites and as of
Saturday evening she was
waiting for a response. The
EPA didn’t respond to re-
quests for comment.
HARVEY’S AFTERMATH
President Trump and first lady Melania Trump visited a shelter.
Hurricane Harvey, which
first made landfall last week,
has had the worst effect for
communities along 250 miles
of the Texas coast with its
high winds and record rainfall.
More than 45 people have died
because of the storm, local of-
ficials say. That number could
postrecession oil-and-gas
boom when Houston’s econ-
omy seemed unstoppable.
Those units were largely
spared by Harvey while af-
fordable housing units suf-
fered more damage.
Ty Counts, a rental agent in
Houston since the 1990s, said
lower-income residents in the
city already had challenges
finding housing, given that the
majority of new construction
has been at the high end.
Houston’s biggest block of
available rental housing lies
within the urban core, with
just over 2,200 vacant apart-
ments found in the downtown
dating millions via televised
news conferences and Twitter
posts about rising water levels
in bayous and reservoirs. To the
multitudes worrying about
floodwaters, Mr. Lindner has
become a no-nonsense hero.
The devotion of some Hous-
tonians to Mr. Lindner has
reached unexpected propor-
tions. Noticing that he hasn’t
been able to break from his
work, one started a GoFundMe
account on Thursday to finance
a vacation for Mr. Lindner. By
early Saturday, it had smashed
its $4,000 goal, garnering more
Without additional federal
or state help, local inspectors
will do targeted air testing,
but their ability to test water
is limited, said Donald Rich-
ner, senior project manager
for the bureau of pollution
control and prevention within
the Houston Health Depart-
ment’s environmental division.
“We would appreciate any as-
sistance,” he said.
City inspectors will drive
around the perimeter of the
industrial locations with air
monitors and infrared cam-
eras, looking for evidence of
leaking hazardous waste. They
Monday, September 4, 2017 | A7
Port Arthur, where officials
said thousands of people have
been evacuated. Many Texans
crossed the state line to shel-
ters such as the Civic Center,
which housed more than 800
storm victims last week.
At a staging area in Or-
ange, Bill Borchert, a 53-year-
old volunteer with a group
from Louisiana that came to
KEVIN LAMARQUE/REUTERS
distribute food and hot meals
to displaced residents, said
some evacuees hadn’t eaten in
three days.
Mr. Abbott on Friday warned
that floodwaters remained dan-
gerous and told residents to ex-
ercise caution. Areas in Hous-
ton and surrounding counties
still rise pending investiga- remain flooded, including Bra-
tions of other deaths. zoria County where roads are
The Louisiana city of Lake still closed, and portions of
Charles, while affected by Fort Bend County to the south-
flooding, emerged as a point of west still have mandatory evac-
refuge for residents of storm- uation orders.
battered towns in Southeast Even as parts of Houston
Texas, including the hard-hit clean up, Harvey’s toll else-
cities of Beaumont, Orange and where in Texas and Louisiana
area, according to RealPage, a are staying with family tem-
real-estate software and data porarily, after being rescued
analytics firm based in Dallas. Friday by ladder and boat
Monthly rent for available from the house they had been
units in that area averages renting near the Addicks Res-
nearly $1,800, compared with ervoir in northwest Houston.
just over $1,000 for the city as She said she wanted to find
a whole. an apartment in the same ele-
“For the people who have mentary school district but
means and money and insur- knows of nothing in the fam-
ance, they’re going to be ily’s price range of $800 to
fine,” Mr. Counts said. He said $900 a month, particularly
he worried lower income since so many of the proper-
renters would “really suffer ties they might have afforded
because if all the cheap apart- also flooded.
ments are gone, where are “We’re living basically in
they going to go?” my brother’s living room,
Jesley Romero and her staying on a pullout couch,”
husband and two young sons she said, fighting tears. “Only
time can tell what the future
holds.”
than $17,000 in donations. The storm appears poised
On social media, where he to transform a rental market
has become a sudden star, an- from one where supply ex-
swering questions on which ceeded demand to the other
streets and neighborhoods way around, both for high-
were flooding well into the wee end and low-end properties.
hours, some went further. Renters will likely have to
Calling Mr. Lindner her “new compete for a dwindling num-
crush,” one Twitter user wrote: ber of vacant units, and in
“Love me a smart man who is some cases pay higher rents
steady in a crisis.” than they would have before
As a government employee, the disaster.
Mr. Lindner can’t accept gifts Apartment researchers said
over $100, so he said he would they anticipate that rents
like the vacation-fund money to could rise by as much as 10%
go to flood victims. over the next several months.
—Erin Ailworth Until recently, Houston rents
were essentially flat.
will then test water where cleanup officials at 41 south-
there are signs of contami- east Texas Superfund sites as
nated air, Ms. Raun said. of Saturday afternoon showed
The EPA said in a press re- 28 escaped damage or exces-
lease Sunday that it continues sive flooding. Two more loca-
to work with Texas and local tions swamped by the storm’s
authorizes to assess Harvey’s record rains don’t need emer-
impact on drinking water, gency cleanup, the EPA said.
wastewater plans and the en- The remaining 11 sites re-
vironment. The agency added mained too flooded to inspect,
that it would target industrial the EPA said Sunday, including
and hazardous-waste sites for the San Jacinto Waste Pits,
floodwater sampling. Cleanup where toxic paper-mill waste
crews at Superfund sites con- is covered by an armored cap.
tinue to provide updates to The cap “has required
EPA and Texas environmental many repairs and extensive
officials, the agency said. Aer- maintenance,” the EPA said in
ial images and contact with September.
worsens. The city asked resi-
dents in eight Houston ZIP
Codes on Saturday to conserve
water and not flush toilets or
use extra water for showers,
baths, laundry and dishes until
further notice.
The Environmental Protec-
tion Agency said it conducted
initial assessments of 41 Su-
perfund sites in areas where
Harvey has had an impact. The
EPA found that 13 sites have
been flooded or were damaged
because of the storm.
Of those sites, two have
been inspected and don’t re-
quire emergency cleanup. The
agency said response teams
haven’t been able to reach 11
other sites.
More than 42,000 people in
Texas remain in shelters, ac-
cording to the Red Cross. An
additional 1,500 people are in
six emergency shelters in Lou-
isiana, the organization said.
—Tawnell D. Hobbs
contributed to this article.
Houston
Faces
Medical
Shortages
BY MELANIE EVANS
HOUSTON—Mary Eierdam,
59 years old, began nervously
rationing her dwindling oxy-
gen supply as tropical storm
Harvey barreled into Texas.
The portable oxygen ma-
chine she normally uses had
broken, so the chronic-lung-
disease sufferer switched to
tanks Aug. 26 but turned
down the flow to try to make
her limited supply last. She
couldn’t reach her usual dis-
tributor to bring more tanks,
and a local hospital was
closed. Eventually she started
growing lightheaded. “Please
Help!” she wrote on Facebook.
By Thursday, when emer-
gency responders brought her
to a makeshift clinic at a fair-
grounds outside Houston and
hooked her up to an oxygen
supply, Ms. Eierdam had about
six hours of oxygen left in her
own tank, she said.
A shortage of vital medical
supplies like oxygen machines
is just one of the problems
hobbling health care in the na-
tion’s fourth-largest city as it
emerges from Harvey’s devas-
tating floods. Resident de-
mands for medication and life-
saving equipment are adding
to the strain on health-care
clinics and emergency rooms
and setting off a scramble to
get critical supplies where
they are needed most.
“Oxygen has been at the top
of the list,” said Kate Dischino,
director of emergency re-
sponse for AmeriCares, a
health-care disaster-response
nonprofit.
A breakdown in the supply
of prescription drugs and
medical equipment was one of
several problems that David
Persse, the top doctor for the
Houston Health Department,
discussed with health officials
and hospital chief executives
on Thursday as they plotted a
way out of the crisis.
Exhausted hospital staff
was another top problem they
discussed, as was the need to
provide mental-health care for
residents overcome by storm-
related losses, according to
people at the meeting.
“The supply and need are
always mismatched” after
massive storms, Dr. Persse
said Friday. “That’s what
makes it a disaster.”
Scarcity isn’t the only logis-
tical problem. City health offi-
cials had nowhere to put 1,500
pounds of insulin delivered
Thursday to the jam-packed
conference center. The ship-
ment, which included an addi-
tional 4,500 pounds of sy-
ringes and other diabetic
supplies, was more evacuees
needed, Dr. Persse said.
Meanwhile, there was a
stark need for insulin outside
of Houston on Friday, as clin-
ics in Galveston and Beaumont
waited for shipments orga-
nized by Healthcare Ready,
which began flying emergency
supplies into Houston’s airport
on Monday and ferrying them
out by helicopter.
Demand for medical care is
expected to surge in coming
weeks, as the chronically ill
turn to emergency rooms for
care, hospital officials said.
 For personal non-commercial use only. Do not edit or alter. Reproductions not permitted.
To reprint or license content, please contact our reprints and licensing department at +1 800-843-0008 or www.djreprints.com
A8 | Monday, September 4, 2017
Calvin Klein’s Luxury Test
At New York Fashion Week, the mid-priced brand hopes to prove its high-end collection
CLOCKWISE FROM TOP LEFT: CALVIN KLEIN (2); BILLY FARRELL AGENCY; GETTY IMAGES (2)
BY RAY A. SMITH
On opening night of New York
Fashion Week Thursday, Calvin
Klein is hoping to prove that its
much-lauded new luxury line is
more than just a one-hit wonder.
If asked to quickly name a few
hot luxury fashion brands, the av-
erage customer wouldn’t have
mentioned Calvin Klein. But now,
the nearly 50-year-old label better
known for its midprice signature
underwear and jeans sold at
Macy’s and Lord & Taylor is work-
ing hard to win over the Barneys
shopper too.
Calvin Klein Inc. hired ac-
claimed fashion designer Raf Si-
mons last year to lead what its
chief executive Steve Shiffman
calls a “creative revolution,” over-
hauling everything from its clothes
to its logo, now officially in all
caps and in a new custom font
called “Klein.” The designer’s de-
but runway show for the brand’s
highest-end ready-to-wear collec-
tion in February drew widespread
raves from critics and retailers.
Now as the label mounts its sec-
ond show under Mr. Simons, Mr.
Shiffman will have to prove it can
sustain the buzz.
The American fashion industry
is counting on Calvin Klein to give
a needed boost to fashion week,
which this year suffered a blow
when some of its biggest draws—
Proenza Schouler, Rodarte, Thom
Browne and Altuzarra—opted to
show in Paris instead. Meanwhile,
the global industry is watching to
see how the revival of an iconic
American brand plays out.
“Raf and I share many common
goals, but one is to see Calvin
Klein become one of the world’s
great brands as we move into the
future,” said Mr. Shiffman, a vet-
eran of Calvin Klein’s parent com-
pany PVH Corp. who spent seven
years as a Calvin Klein executive
before becoming CEO in 2014.
Mr. Simons said he valued Mr.
FOLK-SONG EPIPHANY
Dar Williams, 50, is a
folk singer-songwriter
and guitarist who has
recorded more than 20
albums. She is the au-
thor of “What I Found in
a Thousand Towns” (Ba-
sic Books). She spoke
with Marc Myers.
In 1972, when I was 5,
my family spent a lot of
time together in the liv-
ing room. As my two older sisters
and I worked on jigsaw puzzles,
my parents read and listened to
their folk albums. Judy Collins’s al-
bum “Whales & Nightingales” from
1970 was a favorite.
We lived in Chappaqua, N.Y., out
in the suburbs of New York City,
so nights were quiet. Folk music
rocked my world even then. I was
moved by how seriously artists
took themselves. Everything was
about life and death, and all the
LIFE&ARTS
FASHION
is more than a one-hit wonder.
Shiffman’s leadership and knowl-
edge: “He and I have a wonderful
ongoing exchange, and I am grate-
ful for his support and under-
standing of my role and creative
vision,” Mr. Simons said by email.
Calvin Klein started his com-
pany in 1968 with business partner
Barry Schwartz. Through minimal-
ist clothing and savvy marketing,
Mr. Klein turned it into one of the
hottest fashion brands of the
1980s and 1990s.
Mr. Klein understood that sex
sells early on, titillating audiences
with provocative commercials, like
the one featuring a 15-year-old
Brooke Shields purring “You want
to know what comes between me
and my Calvins? Nothing,” in 1980.
There was the 1989 Obses-
sion fragrance ad featur-
ing a nude couple on
a swing, and the
racy underwear
ads in the 1990s
starring a shirt-
less Marky Mark
and a topless Kate
Moss.
In more recent
years, the brand
has chugged along
but lost its status
as a leading fashion
voice, despite at-
tempts to strengthen
its high end.
Mr. Shiffman tapped
Mr. Simons, whose lux-
ury-fashion bona fides in-
clude a 3½ year run as
creative director of Chris-
tian Dior and seven years
as creative director at Jil
Sander. Mr. Simons’ job is to
give Calvin Klein the high-fash-
ion credibility that has eluded it
since its visionary founder
stepped away from the company
after selling it to PVH in 2003.
“When I walked into the job, I
had to acknowledge we really
weren’t winning at the luxury
level,” Mr. Shiffman said. “It’s
great [from a] public relations as-
PLAYLIST: DAR WILLIAMS
songs Judy sang were
like this.
One spring day when
I was 16, I stayed home
from school. I wasn’t
feeling well and had a
performance that night
with a little dance
troupe at the Guggen-
heim museum in Man-
hattan. I wanted to rest
up.
Home alone, I put on
“Whales” while doing my home-
work. When “Sons Of,” the second
track, came on, I was again com-
pletely taken by the song. It was
originally co-written and recorded
by French singer Jacques Brel.
Shortly after “Sons Of” began, I
saw my neighbor’s dog limping
across our lawn. I hadn’t seen the
dog for years, and suddenly it was
old. It was a powerful mortality
moment. As I listened, I felt some-
thing change inside of me. I sensed
pect. But at the same time, I’m a
businessman, and I want to make
it a business.”
Having a stronger high-end
business will “set the tone” for the
brand’s more affordable lines, Mr.
Shiffman says. He hopes the com-
pany can grow from about $8.5
billion in global sales to $10 bil-
lion, as the aesthetic refresh trick-
les down.
While the bulk of sales growth
will continue to come from the
company’s midprice
jeans and under-
wear, which he
Two looks from
the Calvin Klein
Collection’s
February debut
at New York
Fashion Week.
poetry’s power and how it could
alter how you look at life.
Judy’s version has a gentle car-
ousel-like arrangement behind
her, and she delivers the lyric so
powerfully: “Some built the roads,
some wrote the poems / Some
went to war, some never came
home / Sons of your sons, sons
passing by / Children lost in lul-
laby.” When Judy finished, I
started to cry. I finally under-
stood the words and how the
world of my parents had been
transformed by poetry and folk
music.
I didn’t tell my parents what
had happened to me that after-
noon. It’s not the kind of thing you
tell anyone other than your favor-
ite English teacher.
And that’s the whole thing. You
don’t know who to talk to about
this. You suddenly see the world
differently, and, in a way, the song
becomes your confidant.
THE WALL STREET JOURNAL.
Clockwise from left: the high-end
collection’s ad campaign; a 2017 ad
featuring 1993 photos of Kate Moss;
Steve Shiffman, left, and Raf Simons.
described as “incredibly impor- High-rise straight-leg jeans cost
tant” to the brand, he envisions $495 for the higher-end collection,
more sales from the higher-end compared with $69.50 to $128 for
collection than in the past. men’s straight-leg jeans in the
Maintaining a strong luxury-end main line, and $69.50 to $148 for
image and a mass reputation at women’s.
the same time is a tricky feat that One of Mr. Simons’ first moves
few big fashion brands have man- was rebranding. The highest-end
aged successfully. Mr. Simons is collection, once called Calvin Klein
known as a conceptual, modernist Collection, is now CALVIN KLEIN
designer but has little experience 205W39NYC, a nod to the address
appealing to a wide audience. of the New York-based company’s
Some of his more daring looks headquarters. “It’s a whole mouth-
from the February show featured ful,” Mr. Shiffman said, with a
removable, transparent plastic laugh. Internally, “we’ve already
overlays that were reminis- abbreviated it. We call it CALVIN
cent of retro couch covers. KLEIN 205 or 205 collection. Ev-
Others had jarring chunky erybody’s going to interpret it in
“varsity sleeves” resem- their own way.”
bling slouchy legwarmers, The 205 collection includes a
but for arms. new, high-end jeans line called
Mr. Shiffman made CALVIN KLEIN JEANS ESTAB-
Mr. Simons chief cre- LISHED 1978 in a nod to the com-
ative officer, mean- pany’s original jeans launch. It was
ing the designer the sleeper hit of the February
oversees all Calvin runway show, largely because of
Klein lines, includ- the patches on the back of the jean
ing home, jeans, un- featuring a silhouette of Brooke
derwear, the more- Shields posed in her famous 1980s
affordable men’s jeans ads. The collection also in-
and women’s lines cludes a high-end underwear line.
and the highest- Since Mr. Simons’s February
end collection, show, the 205 collection is being
plus advertising carried in 500 retail locations
and marketing. world-wide, including upscale on-
Only Calvin Klein line retailers like Net-a-Porter.
himself had that “It’s the first time we’ve carried
much control. Be- the brand ever, or at least in many,
fore Mr. Simons many years,” said Daniella Vitale,
came on board, chief executive of Barneys New
responsibilities York, which will stock the CALVIN
were divided among KLEIN 205W39NYC men’s and
various people. Mr. women’s apparel collections in its
Shiffman made the 14 full-priced stores and online.
change in the hopes of Barneys will also be the first and
sending a consistent only retailer to carry the collec-
brand message from the tion’s handbags for fall.
merchandise sold at As the strategy for Calvin Klein
Barneys to that sold at ramps up, Mr. Shiffman’s office
Macy’s. will move from another floor to
A women’s cotton-satin the office next to Mr. Simons’.
overcoat from the high-end “You want to have a quick conver-
collection is priced at sation,” said Mr. Shiffman, when it
$2,495, compared with comes to decision-making. “Not
$298 for a mélange wool everything needs to be this for-
blazer coat in the main line. malized meeting.”
GETTY IMAGES
Judy Collins performing around 1970.
For personal non-commercial use only. Do not edit or alter. Reproductions not permitted.
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THE WALL STREET JOURNAL. Monday, September 4, 2017 | A9

LIFE & ARTS

WEEKEND CONFIDENTIAL | By Alexandra Wolfe

The Life of a Professional Skeptic

Michael Shermer, founder of the Skeptics Society, stands up for science and warns against utopias
MICHAEL SHERMER, the founder death through such methods as
of the Skeptics Society, points to a deep-freezing (cryonics) or up-
single event in the late 1970s as his loading memories into the cloud.
breaking point with the Christian- “There’s no assurance that by
ity of his youth. The “final straw,” copying every last thing in your
as he calls it, was finding himself brain, you’re going to wake up and
at the hospital bedside of his col- say, ‘Here I am!’ ” he says. “You
lege girlfriend, who had been a wouldn’t wake up inside the com-
passenger in a van that rolled off puter—you’d just be dead.”
the side of a hill, breaking her back President Donald Trump may of-
and leaving her paralyzed from the ten dismiss “fake news,” but Dr.
waist down. He prayed fervently Shermer warns against shrugging
for her recovery, to no avail. “If off evidence. Still, he says, “Every-
anyone deserved to be healed it one does it to a certain extent…It’s a
was her, and nothing happened, so little more heightened now because
I just thought there was probably the internet is so fast to respond in
no God at all,” he recalls. real time.” Politicians have always
His career over the past several ignored data, he says, though Mr.
decades has involved insistent Trump “seems to be more bold
questioning not just of religious about it than others, and that in-
belief but of other sorts of ortho- spires others to do the same.”
doxy, in pop culture, self-help, sci- Recently, Dr. Shermer has de-
ence and politics. This month nounced both the alt-right and “the
marks the 25th anniversary of the regressive left.” After the violent
Skeptics Society, which is now a white supremacist protest in Char-
50,000-member group dedicated to lottesville, he warned against what
“promoting critical thinking and he calls “this whole ‘punch a Nazi’
lifelong inquisitiveness.” thing,” including the actions of the
In his longstanding monthly controversial far-left movement
column for Scientific American, known as antifa. “This is why the
Dr. Shermer, 62, has turned a crit- antifa movement is just as bad as
ical eye on antivaccination advo- the white supremacist movement,”
cates, the campus craze for con- he says. “They both feel they have
demning “micro-aggressions” and a moral cause that’s worth dying
disinviting controversial speakers, for and worth killing for.”
and the movement to ban geneti- In the decades ahead, Dr.
cally modified crops. He has come Shermer expects to see more peo-
out against both climate-change ple adhering to secular philoso-
alarmists and deniers. (He tends phies and Eastern religions with
to side with commentators such stronger links to science: Medita-
as Matt Ridley and Bjorn Lom- tion, he says, can clearly improve
borg, who agree that humans are health and well-being.
changing Earth’s climate but ar- He is less enthusiastic about the
JESSICA SAMPLE FOR THE WALL STREET JOURNAL

gue that the consequences may rise of some New Age philoso-
not be as dire as doomsayers phies, which he says can contain
think.) In his columns and books, troubling quasi-religious urges to-
he has debunked everything from ward utopianism. “There is no one
UFOs and claims of alien abduc- answer to what makes a perfect
tion to conspiracy theories about society,” he says, and the attempt
the Kennedy assassination and the to create an earthly paradise can
9/11 attacks. turn murderous, as it did at Jone-
A convert to evangelical Christi- stown in Guyana in 1978: “Some-
anity as a high-school student in one is in your way, preventing you
La Cañada, Calif., he went to Pep- from achieving eternal happiness,
perdine University intending to be- and they have to be dispensed
come a theologian. But after tak- with.”
ing classes in science and ‘I have hammered the left as much as the right,’ says Mr. Shermer, who is a presidential fellow at Chapman University. Dr. Shermer considers organized
philosophy, he decided to study self-help movements misguided
psychology instead. He later as “the world’s toughest bicycle azine, which he says tackles issues more than a dozen books, includ- because they tend to encourage
earned a Ph.D. in the history of race.” scientifically, questioning hypothe- ing “Why People Believe Weird people to chase after money and a
science at Claremont Graduate At night, Dr. Shermer taught at ses and weighing research and Things” (1997), whose targets in- simple ideal of happiness, rather
University. Glendale Community College. He is data. “The principle is to start off cluded creationists, Holocaust de- than to find satisfaction in a pur-
Unable to find a job as a profes- now a presidential fellow at Chap- skeptical and be open-minded niers and believers in ESP, and poseful life.
sor, he went to work at a cycling man University in Orange, Calif., enough to change your mind if the “The Moral Arc” (2015), which ar- “Most of what we do doesn’t
magazine in Irvine, Calif. He be- where he offers a course called evidence is overwhelming, but the gued that reason and science have make us happy, it makes us more
came so interested in the sport “Skepticism 101.” The school is burden of proof is on the person made the world progressively fulfilled as a person,” he says. His
that he started cycling hundreds of about 2½ hours from Santa Bar- making the claim,” he says. “I more just. morning bike ride, for example,
miles a week and racing long dis- bara, where he lives with his wife. would change my mind about Big- His new book “Heaven on wasn’t fun, he says. “It’s a suffer-
tances, with the support of corpo- Dr. Shermer started the Skeptics foot if you showed me an actual Earth” comes out in January. In it, fest,” he says. “It’s 90 degrees out,
rate sponsors. In 1982, he co- Society in 1992 out of his garage. body, not a guy in an ape suit in a he casts a critical eye on many re- my lungs are screaming and my
founded the 3,000-mile Race For the past 25 years, he has also blurry photograph.” ligious visions of the afterlife and legs are screaming, but I feel bet-
Across America, which bills itself edited and published Skeptic mag- Dr. Shermer is the author of on the high-tech quest to evade ter after.”

EXHIBITION REVIEW

MANY OCTAVES
OF MEANING
Boursier-Mougenot’s “Clinamen v.
BY DAVID MERMELSTEIN
3,” essentially a wading pool filled
with immaculate porcelain bowls
CÉLESTE BOURSIER-MOUGENOT/PAULA COOPER GALLERY, NY/SFMOMA

San Francisco of various sizes clinking as they

THERE AREN’T many museum gently collide? At its most inno-
shows that can honestly claim to be cent, the work is both visually en-
fun for all ages, but “Soundtracks” gaging (blue water, white china)
at the San Francisco Museum of and sonically attractive (think
Modern Art is surely one of them. wind chimes). Older museumgoers
This sprawling exhibit of some 25 may opt to sit on the plywood plat-
works, all from this century and form that encircles the pool and
most constructed after 2010, occu- find a moment’s serenity in the
pies the museum’s entire seventh “music” being made. And someone
floor, along with some spaces else- really curious might consider the
where in the building and, in one work’s Latin title and ponder its
case, even outside it. real, if abstruse, physical and phil-
The concept of sound as exhib- osophical properties.
ited art may stretch some people’s Though Mr. Boursier-
notions of the form, but along with Mougenot’s work may linger lon-
the rise of video as art, sound has gest in the memory, “Soundtracks”
increasingly found itself not just greets visitors with two works that
welcomed but displayed in galleries are bound to exert their own grip. Céleste Boursier-Mougenot’s ‘Clinamen v. 3’
originally constructed as show- Anri Sala’s “Moth in B-flat,” a
cases for static visual art. Still, this snare drum mounted upside down empty tin cans connected by yards distorts an endlessly looped lullaby each contains the complete works
show, conceived by Rudolf Frieling, on the ceiling with sticks that ap- of crisscrossed string. It’s unclear sung by Sofia Jernberg. of a single composer—Mozart,
curator of media arts at SFMOMA, pear to be played by invisible whether either has an integrated Conversely, Rafael Lozano-Hem- Wagner and Cage—played simulta-
marks a major turning point in the hands, could have escaped from a sonic component, even as both mer’s “Last Breath,” which carries neously in an impossible tangle.
embrace of sound as museum-wor- tony magic club. Yet a clever idea suggest the prospect of sound. an implicit chill, operates in a This show’s chief achievement,
thy art. And not just because of the lies beneath: Vibrations produced Pleasures of a different sort brightly lighted space. Bookending earned through cheek and intelli-
exhibition’s scale. It’s the wide va- by unheard playback cause the await those who enter the exhibit’s a length of white respirator tubing gence, is that sound can stake a real
riety of conceits, materials, intent drumsticks to move, producing au- darker corners. “New Urban Spaces are a motor and a brown paper claim to belonging in a museum’s
and expression that really distin- dible sounds—a conceptual and Series #4: ‘Compact Forest Pro- bag. As the motor pumps air traditionally silent galleries. True,
guishes what’s on display. physical inversion. “Cantilena,” by posal’” by Brian Eno lures visitors through the tubing, the bag in- pure sound remains best appreci-
Ultimately, “Soundtracks” can the duo O Grivo, looks like a mas- into an alien world composed flates and deflates, mimicking the ated in a concert hall or jazz club.
be considered a meditation on sive Tinkertoy set come alive— largely of string lights and ambient labored breathing of a hospital pa- But when combined with other ele-
sonic possibilities. The show’s rods, discs and wires all animated music emanating from 10 asynchro- tient, while nearby, on video, the ments (visual, tactile, etc.), the au-
depths, while not always immedi- by hidden electric motors produce nous CD players. The effect is ut- avant-garde composer Pauline Oli- ral can exert as potent a pull on our
ately apparent, are abundant and a beguiling cacophony certain to terly transporting, and those who veros, who died last year, breathes imagination as anything we see.
striking, should one wish to con- mesmerize any passerby. Two enter knowing nothing of what’s in- into a paper bag. Sharing the same
sider them. But “Soundtracks” can works by Amalia Pica also spark side will encounter an additional gallery are three orbs from Mr. Lo- Mr. Mermelstein writes for the
also be enjoyed, thoroughly, on an amusement. The first, “Eavesdrop- surprise, revealed gradually to un- zano-Hemmer’s less macabre Journal on classical music and
entirely superficial level. Visitors ping,” places on a wall an array of settling effect. Camille Norment’s “Sphere Packing” series, their sur- film.
may enter its many discrete areas, drinking glasses perpendicular to “Lull” haunts in a different way, as faces covered in ear buds emitting
appreciate a work’s immediate im- the viewer; the second, “Switch- an upside-down microphone swings muffled sounds similar to what one Soundtracks
pact, and move on. What child board (Pavilion),” finds a wooden pendulum-like over a spotlighted hears on a cheap radio when navi- San Francisco Museum of Modern Art,
won’t be delighted by Céleste roomlike structure studded with amplifier, producing feedback that gating between stations. In fact, through Jan. 1, 2018
For personal non-commercial use only. Do not edit or alter. Reproductions not permitted.
To reprint or license content, please contact our reprints and licensing department at +1 800-843-0008 or www.djreprints.com
A10 | Monday, September 4, 2017 THE WALL STREET JOURNAL.

OPINION
REVIEW & OUTLOOK
Making Growth
Texas, Thou Hast Sinned Great Again
W
ho says progressives don’t believe jobs. Maybe all those drillers and refiners can
in religion? They may not believe in work for Google or Facebook. In May 2014, a broad to note is the difference between “pop-
collection of thinkers ulist” policies and a “populist” delivery
Jehovah or Jesus, but they certainly Then there’s the political assault on Houston’s
and politicians gath- (of which Reagan was a master).
believe in Old Testament-style pro-growth development poli- ered in Washington to Mr. Trump has defined himself as
wrath against sinners. Real Progressives blame cies. “Harvey Wasn’t Just Bad celebrate a new conser- the protector of America’s forgotten
Noah and the Ark stuff. Wit- Houston’s success for Weather. It Was Bad City Plan- vative “manifesto.” The man, an outsider to the swamp, an
ness the emerging theme on ning,” shouts a piece in
the media left that Texas, and the hurricane disaster. Bloomberg Businessweek: POTOMAC document called for re- America Firster. The result is that he
placing stodgy old Rea- is uniquely qualified to sell a tax
WATCH
especially Houston, are at “Sprawling Houston is a can- By Kimberley
ganite economics with plan decried as “elitist” to average
fault for the devastation of do city whose attitude is grow warmer, fuzzier hand- Americans.
A. Strassel
Hurricane Harvey. first, ask questions later. It’s the only major U.S. outs to the middle In Missouri, Mr. Trump busted up
This has happened even faster than usual, city without a zoning code saying what types of class. Donald Trump the left’s class-warfare model. He
perhaps because the Katrina II scenario of buildings can go where, so skyscrapers some- must have missed the memo. didn’t make tax reform about blue-
The president formally opened the collar workers fighting corporate
emergency mismanagement didn’t pan out. The times sprout next to split-levels. Voters have re-
tax wars on Wednesday with his America. Instead it was a question of
state, local and federal governments have done peatedly opposed enacting a zoning law.” speech in Missouri challenging Con- “our workers” and “our companies”
a competent job under terrible conditions, and How dare those Texas hicks reject the politi- gress to meet his principles for re- and “our country” competing against
stories about neighborly charity, racial good- cal controls over building that zoning laws rep- form. The media almost uniformly ap- China.
will, the heroism of rescuers, and Big Business resent. How dare they prefer lower construc- plied to the speech its favorite (though He noted that America’s high tax
donating money and goods don’t fit into any tion costs and affordable housing. The average misused) descriptor: “populist.” But rates force companies to move over-
agenda. Whinging over Melania’s heels also rent on a one-bedroom home in Houston is 60% the real news was that Mr. Trump seas. He directly and correctly tied
lacks political legs. lower than in San Jose, Calif., in part because wants to make Reagan-style tax reform corporate-rate cuts to prosperity for
So our friends on the left have had to look the city issues permits once builders satisfy a great again. workers, noting that tax reform would
elsewhere to score ideological points, and they health and safety checklist. They don’t have The left saw this clearly, which ex- “keep jobs in America, create jobs in
plains its furious and frustrated reac- America,” and lead to higher wages.
believe they’ve found the right target in the po- many mandates that raise costs. Tens of thou-
tion to the speech. “Trump’s New Tax
litical economy of those greedy Texans. Specifi- sands of people move to Houston and its Scam: Selling Plutocracy as Populism,”
cally, Houston is a global hub of the oil and gas swampy climate because they can get good jobs ran a headline in Vanity Fair, bemoaning Republicans should learn
industry, and it has allowed “laissez-faire” de- and afford to live there. that “Trickle-down is back, baby.”
velopment without zoning laws. This has Zoning also has little or nothing to do with Democratic strategist Robert Shrum
from how Donald Trump is
brought the righteous wrath of Harvey down flooding. Some on the left blame roads built railed in a Politico piece that the “plu- selling supply-side tax cuts.
on their own heads. over wetlands. But according to Joel Kotkin’s tocrat” Mr. Trump was pitching a tax
i i i Center for Opportunity Urbanism, the main cut for “corporations and the top 1
“Harvey, the Storm That Humans Helped problem is Houston’s topography. Its clay soil percent” yet was getting away with a Mr. Trump pitched tax simplifica-
Cause,” said a headline in one progressive doesn’t absorb water well and the flat city “perverted populism.” Trump voters tion as a question of fairness, urging
bellwether as the storm raged. An overseas doesn’t drain well. In the 1800s when there had been “tricked into voting against lawmakers to eradicate the “special-
themselves,” and now Mr. Trump was interest loopholes” that his own busi-
columnist was less subtle if more clichéd: were no highways or parking lots, parts of the
pulling a similar con with taxes. ness uses, so as to level the playing
“Houston, you have a problem, and some of city were often flooded. Nonsense. Mr. Trump is selling field for Americans who can’t afford
it of your own making.” In this telling, Hous- The loss of wetlands since the early 1990s pro-growth policies—something his “an army of accountants.”
ton is the Sodom and Gomorrah of fossil fuels, has reduced Houston’s capacity to absorb wa- party has forgotten how to do. And This all sounds pretty good, unless
which cause global warming, which is produc- ter by some four billion gallons, but Harvey there’s nothing very “populist” about you’re Chuck Schumer.
ing more hurricanes. dropped trillions of gallons of rain. Harris it, at least not by today’s political The question is whether Mr.
The problem is that this argument is fact- County, which surrounds Houston, has ex- standards. Trump’s courage will help congressio-
free. As Roger Pielke Jr. has noted, the link be- panded storm-water retention ponds. But no The left has defined the tax debate nal Republicans overcome their embar-
tween global warming and recent hurricanes amount of flood control could have prevented for decades in terms of pure class rassing skittishness.
and extreme weather events is “unsupportable damage from a once-in-500-years storm. warfare. Republicans have so often Some in the GOP want to ditch cuts
based on research and evidence.” Mr. Pielke, New York City has plenty of zoning and build- been cast as stooges for the rich that to the individual top rate, as if caving
the GOP is scared to make the full- on that question will spare them Dem-
who is no climate-change denier, has shown ing limits, yet it suffered $19 billion in damage
throated case for a freer and fairer ocratic criticism. Utah’s Sen. Mike Lee
with data that hurricanes hitting the U.S. have from Hurricane Sandy that dropped only a half tax system. It was precisely the and Florida’s Sen. Marco Rubio are
not increased in frequency or intensity since inch of rain. Fifty-one square miles of New York right’s desire for a more “populist” still obsessed with a wildly expensive
1900, there is no notable trend up or down in were flooded by Sandy’s storm surge, 300,000 tax policy that gave us the Reformi- plan to buy the middle class by ex-
global tropical cyclone landfalls since 1970, and homes and 23,400 businesses were inundated. cons and their manifesto for buying panding the child tax credit.
floods haven’t increased in frequency or inten- “Smart growth” plans didn’t prevent that. off the middle class. Other Republicans are balking over
sity in the U.S. since 1950. i i i Mr. Trump isn’t playing this game— proposals to replace the House’s anti-
The National Oceanic and Atmospheric Ad- All of this shows the folly of trying to force- and that’s why the left is unhappy. The quated processes with ones that would
ministration recently said that “it is premature feed natural disasters into neat ideological cat- president wants to reduce business-tax significantly aid the passage of a solid
to conclude that human activities—and partic- egories. Major storms cause major damage, and rates significantly and encourage tax reform. These timid souls worry
ularly greenhouse gas emissions that cause sometimes even the best mitigation plans can’t American companies to repatriate bil- about how it might look to change the
lions of profits held overseas. He way a bill is scored, a baseline tallied
global warming—have already had a detectable prevent it. No doubt Houston will learn lessons wants to simplify the tax code in a way or a budget window defined.
impact on Atlantic hurricane or global tropical from Harvey about drainage and building that that will eliminate many cherished If Republicans won’t even risk blow-
cyclone activity.” might reduce the damage the next time. Risk- carve-outs. He wants tax relief for back on procedural issues that sound
No less than the United Nations Intergov- based insurance for property would also help “middle income Americans,” though he like Swahili to most Americans, good
ernmental Panel on Climate Change says it reduce taxpayer losses. also praised to the sky the 1986 Rea- luck with tax reform.
lacks evidence to show that global warming Texans are used to being sneered at by gan reform that reduced the number of Mr. Trump bombed badly with
is making storms and flooding worse. But cli- coastal elites, and we trust they’ll reject this tax brackets and significantly lowered health care, failing to take the case for
mate scolds still blame Harvey on climate attempt at their moral improvement too. Their top marginal rates. Congress’s effort to the public. The
change because, well, this is what the climate rebuilding will be that much faster, and Mr. Trump did sneak a nod to White House is determined this time
models say should happen as the climate cheaper, because they have a resilient economy Ivanka into the speech by including to keep Mr. Trump focused as national
her proposal to hand out taxpayer spokesman. His opening salvo has
warms. built on energy and zoning laws that make
money for child care. But his address given Republicans the cover to push
In other words, Houstonians, you’d better go housing affordable. They also know the differ- was largely a hymn to supply-side eco- ahead, as well as valuable pointers on
to climate confession, mend your sinful ways ence between an act of nature and progressive nomics, stunning Democrats who be- selling growth economics.
and give up all of those high-paying oil-and-gas political opportunism. lieved they’d forever dispelled such If they can’t get the job done—with
voodoo. the power they now have in Washing-
What made the left even more apo- ton—they’d best admit the Democrats’
Some Hopeful News Out of America plectic was the president’s manner of class-warfare “populism” has won.

A
sales pitch. What journalists always fail Write to kim@wsj.com.
mid so much bad news out of Texas, are also moving fast to exploit CAR-T treat-
our vote for hopeful story of the week ments, including Novartis AG, and there’s no LETTERS TO THE EDITOR
goes to Gilead Sciences’ bid to buy guarantee that Gilead-Kite will be first to mar-
Kite Pharma Inc. for about ket. That’s a risk for Gilead
$11 billion. That’s a big bet on Gilead offers a vote of shareholders. Maybe the Tragic Distance Isn’t All That Far
a new type of cancer therapy confidence in a new The exciting news for the It’s true, as Bernard-Henri Levy the two sides go at it. The result was
based on genetically modify- rest of us, especially the states, that there were differences be- very predictable.
ing a kind of immune cell cancer treatment. many who will get cancer tween the tragedies in Charlottesville, The situation in Barcelona was
known as T-cells. over our lifetimes, is the vote Va., and Barcelona last month (“The much more difficult to predict and is
Our Allysia Finley recently of confidence the merger sig- Distance Between Two Tragedies,” therefore more difficult to fix. The
wrote about the so-called CAR-T treatment in nals for improving survival rates. Not too long op-ed, Aug. 28). However, there were biggest distance is that between Mr.
an interview with Carl June, one of the cancer ago academic and media scolds were dismiss- also strong similarities. Levy’s Charlottesville narrative and
researchers behind the discovery. The treat- ing U.S. drug research as providing little more The most important of the similari- the whole truth. He omits the Antifa
ties was that in both cases the perpe- role in the riot. That conflict resem-
ment shows remarkable results in many pa- than marginal gains. And major newspapers
trators of the tragedy (and that in- bled Germany’s 1930s Communist and
tients, and the U.S. Food and Drug Administra- were claiming little or no progress against cludes Antifa and their cronies) had Nazi street battles.
tion on Wednesday approved the therapy for cancer. Now they’re fretting about the costs turned to violence to accomplish what By not naming and condemning the
acute lymphoblastic leukemia. of breakthrough drugs that have the potential they couldn’t accomplish through the alt-left, does Mr. Levy indicate he ap-
Gilead, a leading biotech firm, is paying a to cure deadly diseases. legitimate established processes. proves of its other exploits: the shut-
steep price for Kite’s CAR-T technology. But Whether or not Kite works for Gilead as a The solution in both cases is for down of the free speech rally in Bos-
Gilead has the means to do so thanks to the business, it’s good to be reminded that drug re- government to fulfill its responsibility ton and Berkeley’s destructive black-
success of its Sovaldi drug in curing hepatitis search means taking risks in the hope of saving to protect the innocent citizens from hood riot?
C in thousands of patients. Other companies lives and making money in the process. the hooligans and protect the hooli- VIRGIL WEATHERFORD
gans from each other. When those Woodland Hills, Calif.
hooligans come to the “demonstra-
California’s Gift to Trump tion” armed with clubs, the official re-
sponse should be obvious to even the
Without, I hope, being branded
as a Nazi sympathizer or racist, I

T
most politically correct of politicians. have several problems with Mr.
o paraphrase Marx, all great historical mind the new waves of non-English immi- That was the case in Charlottesville Levy’s assessment of what hap-
events occur twice: first as tragedy, grants at the time. when the police stood aside and let pened in Charlottesville.
second as some action by the Los Ange- That’s precisely the danger of applying mod- But what is truly troubling about
les City Council. The latest ern sensibilities to judge peo- his article is his apparent advocacy of
demonstration came Wednes- The Los Angeles City ple from the past. Columbus Why Would China Help the laws to suppress the airing of opin-
day when the council ban- ions that he finds despicable.
ished Columbus Day from the
Council bans Columbus had his faults, and honest his-
tories address them. But if we
U.S. in the Fight Against That’s exactly what the Nazis and
city calendar. Henceforth in Day, echoing the KKK. honored only saints, few would Pakistan and North Korea? other odious regimes did, Mr. Levy.
Los Angeles, the second Mon- make it onto pedestals. GERALD KATZ
Regarding John Bolton’s “The Dan- Edwards, Colo.
day in October will be Indige- If Columbus has to go, does
ger of a Jihadist Pakistan” (op-ed,
nous Peoples Day. FDR’s wartime internment of Japanese-Ameri- Aug. 30) and its conclusion that
We have no dispute with any group or city cans mean we tear down his memorial on the “China can be helpful,” I am as-
that wishes to celebrate the culture and national mall? Most Americans sensibly would tounded that intelligent policy mak- CORRECTION
achievements of indigenous peoples. Such cele- say no, but today it’s the vandals who are ascen- ers can hold out hope for China rid-
brations are a staple of American life and con- dant, here attacking a bust of Lincoln in Chi- ing to America’s rescue. France is the eurozone’s second-
tribute in their way to e pluribus unum. cago, there beheading a Columbus statue in Mr. Bolton’s own article recounts largest economy. The Sept. 1 editorial
But L.A.’s move isn’t about celebrating. It’s New York, there desecrating a Joan of Arc how China has encouraged Pakistan “French Labor Liberation Day” mis-
about indicting anything that represents West- statue in New Orleans. and North Korea to vex India and the stated the country’s rank.
ern civilization, as Christopher Columbus most So perhaps it’s fitting that a Los Angeles City U.S. Why would Beijing suddenly help
Washington remove the vexations it
certainly does. So how ironic that in deposing Council that thinks it is leading a politically cor- Letters intended for publication should
has worked so hard to cultivate? be addressed to: The Editor, 1211 Avenue
the Italian explorer, Los Angeles council mem- rect charge is really completing the work urged China’s calculus hasn’t changed. of the Americas, New York, NY 10036,
bers find themselves taking the side of the Ku by an earlier generation of haters and nativists. America’s expectations for China at- or emailed to wsj.ltrs@wsj.com. Please
Klux Klan of the early 20th century—whose na- We wonder if the council knows it has given test to the bankruptcy of U.S. diplo- include your city and state. All letters
tivism led it to oppose statues, memorials and President Trump a political gift by demonstrat- matic and military policy. are subject to editing, and unpublished
days devoted to Columbus because he was ing that what so many on the left really oppose H ARRY MILLER
letters can be neither acknowledged nor
returned.
Catholic, Southern European and called to is the larger triumph of Western civilization. Mobile, Ala.
For personal non-commercial use only. Do not edit or alter. Reproductions not permitted.
To reprint or license content, please contact our reprints and licensing department at +1 800-843-0008 or www.djreprints.com
THE WALL STREET JOURNAL.
The Hurricane Lull Couldn’t Last
By Roger Pielke Jr.
A
ctivists, journalists and
scientists have pounced
on the still-unfolding di-
saster in Houston and
along the Gulf Coast in an
attempt to focus the policy discus-
sion narrowly on climate change.
Such single-issue myopia takes pre-
cious attention away from policies
that could improve our ability to
prepare for and respond to disas-
ters. More thoughtful and effective
disaster policies are needed because
the future will bring many more
weather disasters like Hurricane
Harvey, with larger impacts than
those of the recent past.
The U.S. hadn’t been hit
by a Category 3 or stronger
storm since Katrina in
2005. We were overdue.
For many years, those seeking to
justify carbon restrictions argued
that hurricanes had become more
common and intense. That hasn’t
happened. Scientific assessments, in-
cluding those of the Intergovernmen-
tal Panel on Climate Change and the
U.S. government’s latest National Cli-
mate Assessment, indicate no long-
term increases in the frequency or
strength of hurricanes in the U.S.
Neither has there been an increase in
floods, droughts and tornadoes,
though heat waves and heavy precip-
itation have become more common.
American Workers Need a New Kind of Labor Union
By Oren Cass
T
o a union leader, the question
“What’s in it for the em-
ployer?” might seem bizarre.
The point of organizing is to improve
labor’s position against management.
But much has changed since U.S.
Congress passed the National Labor
Relations Act in 1935—when work-
places were largely unregulated, the
Great Depression had pushed Ameri-
cans to the brink and labor unrest
was widespread.
The NLRA’s objective wasn’t only
to empower workers but also to end
what Sen. Robert Wagner, its spon-
sor, called “a procession of bloody
and costly strikes, which in some
cases swelled almost to the magni-
tude of national emergencies.”
Today bargaining over employ-
ment terms is mostly superfluous.
The law already mandates a 40-hour
week, paid overtime, a minimum
wage, workplace-safety standards
and employer-sponsored health in-
surance. The government provides
benefits to the elderly, disabled and
unemployed. Yet unions still must
find something to deliver to mem-
bers. Thus the prevalence of destruc-
tive work rules, grievance proce-
dures and seniority systems.
In 1936, after hundreds of deaths
in auto plants, General Motors work-
ers in Flint, Mich., launched their fa-
mous sit-down strike. Among their
demands: permission to speak in the
lunchroom. Seventy years later, GM
had converted the strike site into a
“rubber room” where laid-off union
members earned salaries and bene-
fits for doing nothing.
The NLRA no longer accomplishes
its goals. Its adversarial model pits
labor against management, winning
short-term “gains” for workers while
reducing their long-term value.
Employees seem to understand
this. Since 1953 union membership
has fallen to less than 7% of the pri-
vate labor force from 36%, while
workers’ total share of national in-
come has increased to 66.1% from
64.5%.
As its relevance waned, Big Labor
mutated into a political force. Of the
$2.1 billion spent on federal elections
by the 30 largest donors since 1990,
unions accounted for more than $1
billion—and directed 97% to Demo-
crats. This has locked the status quo
in place: Democrats prize union
PUBLISHED SINCE 1889 BY DOW JONES & COMPANY
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Prior to Harvey, which made land-
fall as a Category 4 storm, the U.S.
had gone a remarkable 12 years
without being hit by a hurricane of
Category 3 strength or stronger.
Since 1970 the U.S. has only seen
four hurricanes of Category 4 or 5
strength. In the previous 47 years,
the country was struck by 14 such
storms.
President Obama presided over
the lowest rate of hurricane land-
falls—0.5 a year—of any president
since at least 1900. Eight presidents
dealt with more than two a year, but
George W. Bush (18 storms) is the
only one to have done so since Lyn-
don B. Johnson. The rest occurred
before 1960.
Without data to support their
wilder claims, climate partisans have
now resorted to shouting that every
extreme weather event was some-
how “made worse” by the emission
of greenhouse gases. Last week New
York Times columnist David Leon-
hardt directed researchers “to shed
some of the fussy over-precision
about the relationship between cli-
mate change and weather.”
Turning away from empirical sci-
ence—or “fussy over-precision”—
comes with risks. But whatever one’s
views on climate, there should be
broad agreement today that bigger
disasters are coming. Some may
blame greenhouse gases, while oth-
ers may believe it to be some sort of
karmic retribution.
But there is a simpler explanation:
Because the world has experienced a
remarkable period of good fortune
when it comes to catastrophes, we
are due.
money, so they shun real reform. Re-
publicans seem content to watch the
dysfunctional system wither.
What a missed opportunity. Orga-
nized labor isn’t inherently partisan or
economically counterproductive. Un-
der Europe’s “Ghent system,” workers
voluntarily join unions independent of
their jobs. Denmark and Sweden have
no required workplace elections or
compulsory dues, yet a majority of
workers are in a union.
Adapting this model to the U.S.
could allow new labor organizations—
call them “co-ops”—to do a lot:
• Expand social insurance. In Eu-
rope, unions administer systems of
voluntary unemployment insurance.
Although the vast U.S. labor market
may seem dissimilar, most Ameri-
can social insurance is already
managed by the states. Co-ops
could supplement or supplant these
programs.
• Improve job training. Today’s
training, run mostly by government
agencies and well-meaning nonprof-
its, is ineffective. Putting co-ops in
charge would keep training focused
on workers, who measure their in-
vestment by the resulting job, not
“enrollment” or “graduation.”
Co-ops may be better positioned
to negotiate with employers over
matters like apprenticeships. One ex-
ample today is the Las Vegas Culi-
nary Union’s academy, created in
partnership with the city’s hotels.
But such programs remain few, and
they come accompanied by the ag-
gressive, oppositional tactics of Big
Labor.
• Strengthen civil society. Co-ops
could act as mediating institutions
for poor and less-educated Ameri-
cans, helping workers build relation-
ships, access resources and provide
mutual aid. Policy makers on the left
and right generally agree on the need
to rebuild social capital but find few
levers. Reforming organized labor is
a plausible one.
• Resolve problems with employ-
ers. Co-ops could help workers build
collaborative relationships with man-
agement. Such arrangements exist in
many countries as company-specific
“works councils.” In Germany they’re
present at almost 90% of companies
with more than 500 employees.
But works councils are prohibited
in the U.S. The NLRA treats them, ab-
sent a formal union, as an unfair la-
bor practice.
Robert Thomson
Chief Executive Officer, News Corp
William Lewis
Chief Executive Officer and Publisher
DOW JONES MANAGEMENT:
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Professional Information Business:
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Ingrid Verschuren, Deputy Head
OPINION
A neighborhood near Addicks Reservoir in Houston on Aug. 29.
Agreement that more big disasters
are on their way should provide oppor-
tunity for those otherwise opposed on
matters of climate policy to come to-
gether and make some smart decisions.
Here is where they might start:
• Establish disaster review boards.
In the aftermath of every plane
crash, the U.S. government convenes
experts under the auspices of the Na-
tional Transportation Safety Board to
find out what went wrong and what
might be done to prevent it from
happening again. Meteorologist Mi-
chael Smith of AccuWeather (a scien-
tist who decades ago helped identify
the “microburst” weather phenom-
ena and its role in plane crashes) has
long argued that the nation needs a
The failure to fix this is another
reminder that Big Labor looks after
itself first. Unions rightly fear works
councils as competition. Former
AFL-CIO president Lane Kirkland
once called them “sham organiza-
tions designed to prevent real
worker empowerment.”
Laws dating to 1935 pit
employees against their
bosses, a zero-sum game
that hurts everyone.
• Provide alternatives to govern-
ment rules. The argument for em-
ployment regulation—say, the mini-
mum wage—flows from the premise
that individual workers lack the le-
verage to protect their interests. But
co-ops bargaining collectively should
be able to accept lower standards if
the company offers something com-
pelling in return.
A retail chain might eliminate “on
call” scheduling in exchange for low-
ering overtime pay below time-and-a-
half. That could reduce costs while in-
creasing worker satisfaction. Allowing
such deals would end zero-sum nego-
How Washington Redefined the Internet
By Bruce P. Mehlman
T
he U.S. Federal Communications
Commission received more than
21 million comments on its plan
to reconsider the Obama administra-
tion’s internet regulations. Most advo-
cates on both sides voice indignant,
moralistic conclusions about the
plight of innovation, the future of the
internet and the fate of the world if
they don’t get their way.
But for the FCC, the question is a
semantic one: Is broadband internet
an “information service,” as con-
cluded repeatedly over two decades
by Democratic and Republican com-
missioners, or a “telecommunications
service” as a partisan majority de-
creed two years ago?
This is a distinction with a pro-
found legal difference under the
Telecommunications Act of 1996.
Telecommunications services are
Notable & Quotable
Rep. Nancy Pelosi, the House
Democratic leader, in an Aug. 29
statement:
Our democracy has no room for
inciting violence or endangering the
public, no matter the ideology of
those who commit such acts. The vi-
olent actions of people calling them-
selves antifa in Berkeley this week-
end deserve unequivocal condemn-
ation, and the perpetrators should
be arrested and prosecuted.
In California, as across all of our
great nation, we have deep rever-
ence for the Constitutional right to
peaceful dissent and free speech.
Non-violence is fundamental to that
right. Let us use this sad event to re-
affirm that we must never fight hate
with hate, and to remember the val-
ues of peace, openness and justice
that represent the best of America.
Monday, September 4, 2017 | A11
the conditions that led to problems.
Local communities need to take bet-
ter advantage of experts who can ex-
plore development choices with an
eye toward better preparing for an
uncertain future.
• Enhance federal capacity. The
federal government plays a crucial
role in supporting states and local
communities to prepare for, respond
to and recover from disasters. When
Harvey was out at sea, accurate fore-
casts from the National Weather Ser-
vice saved many lives. The National
DAVID J. PHILLIP/ASSOCIATED PRESS
Flood Insurance Program shapes how
communities develop, and the Fed-
eral Emergency Management Agency
and other agencies provide resources
for those whose lives are upturned
by natural disasters.
President Trump should also ap-
point a science adviser, whose primary
job traditionally has been to coordi-
nate federal science agencies, facilitate
budget requests and assess perfor-
National Disaster Review Board. Af- mance. There is no reason to go more
ter every disaster, it would evaluate than seven months without one.
what went wrong—and right—and The hyperpoliticized debate over
distill lessons. The Trump adminis- climate change sees the same tire-
tration should create such a board in some script play out with every ex-
the wake of Harvey. treme event. We needn’t all agree on
• Encourage resilient growth. Di- the reasons why disasters will assur-
saster researcher Dennis Mileti has edly get worse in the coming years
explained that the choices made at in order to come together to make
the local level—such as where to sensible decisions about disaster
build—determine how a community policies. The time is now. Our good
will experience disasters. As commu- luck appears to have run out.
nities develop, it can be difficult to
see how local decisions might affect Mr. Pielke is a professor of envi-
disasters years or decades down the ronmental studies at the University
road. This is particularly the case in of Colorado, Boulder. He is the au-
the immediate aftermath of a disas- thor of “The Climate Fix” (Basic
ter, when the push to “return to nor- Books, 2011) and “Disasters and Cli-
mal” might mean simply reinforcing mate Change” (ASU/CSPO, 2014).
tiating, since each side would have Third, allow works councils. The
something to gain. Imagine an em- law should include checks to ensure
ployer dropping an inch-high stack of councils aren’t dominated by the em-
rules on the table and asking the co- ployer. If workers began to think a
op representative: “What will it take council no longer represented their
to get rid of this?” interests, they might have recourse
• Support workers in the gig econ- to a snap “vote of no confidence.”
omy. Co-ops could extend employ- Fourth, let employees designate a
ment-like benefits to Uber drivers, co-op or works council as their rep-
contract coders, call-center temps resentative for collective bargaining.
and other nontraditional workers. Put most employment regulations on
Here the NLRA delivers the worst of the negotiating table to create space
both worlds: The law pushes employ- for mutually beneficial deals.
ers to avoid worker relationships It isn’t crazy to think labor groups
that could trigger collective bargain- should focus on delivering benefits
ing, but it offers little to the pseudo- to workers instead of campaign con-
employees this dynamic creates. Co- tributions to politicians. Or to sug-
ops would give structure to gest employees in the modern econ-
otherwise free-floating careers. omy have more to gain from
How to achieve this vision? The collaboration with their bosses than
smoothest path would involve four from conflict.
steps. First, amend the NLRA to al- If Democrats and Republicans
low alternative labor groups. The law want robust civil society, competitive
covers any worker organization markets, widely shared prosperity,
whose purpose is “dealing with em- and a stronger safety net, they have
ployers.” That jurisdiction should be more than enough reason to give or-
narrowed, while leaving current ar- ganized labor—in a new form—a
rangements in place for union mem- fresh look.
bers who are satisfied.
Second, formally recognize the Mr. Cass is a senior fellow at the
“labor co-operative”: a nonprofit Manhattan Institute. This article was
controlled by dues-paying members adapted from his essay, “More Per-
to advance employment and create fect Unions,” in City Journal’s “The
value, not merely reallocate it. Shape of Work to Come” issue.
subject to the same restrictions and standing bipartisan agreement in fa-
government controls that applied to vor of light-touch regulation fueled
the old Bell monopoly starting in the explosive growth of the internet.
the 1930s. Information services have The FCC under Chairmen Reed
far more freedom to compete and Hundt, William Kennard, Michael
innovate. Powell, Kevin Martin and Julius
The real-world effects of this heavy Genachowski were each correct when
vs. light regulation are dramatic, and they declared or affirmed broadband
they turn on the question of how con- as an information service.
sumers use broadband internet. The FCC under Tom Wheeler was
wrong when it reversed these prece-
dents two years ago to start regulat-
It was an ‘information ing broadband as a telecom service.
The monopoly-style regulation
service’ for 20 years imported by Mr. Wheeler from the
until Barack Obama’s days of rotary phones is both un-
needed to ensure an open internet
chairman came along. and highly inappropriate in today’s
competitive, innovative broadband
marketplace. Reclassification in 2015
In response to the FCC’s inquiries, hurt investment in broadband net-
the Internet Innovation Alliance, of works and innovation in the broad-
which I am co-chairman, commis- band ecosystem.
sioned a study by CivicScience, an Because of that decision, some
online market-research and data- communities and consumers didn’t
analysis firm, sampling more than receive broadband investments as
10,000 U.S. adults. The survey asked
what consumers “regularly or occa-
quickly or as expansively as they
could and should have.
sionally” do online. The results show Returning to the longstanding
clearly that most consumers use the light-touch framework will offer
internet to get information. many benefits to Americans by en-
The survey found that 72% of U.S. couraging investment in broadband
adults frequently read or watch news, networks. Flourishing LTE and 5G
sports or other content online. Sixty- broadband networks, in turn, will
one percent use search engines; 52% spur job growth and accelerate our
purchase items online, and 48% check economy.
or post on social media. Smaller per- And by taking this important step
centages store photos, grocery lists now, the FCC will encourage Con-
and other items. gress to do its job and modernize
The broadband internet access the Telecommunications Act for the
that enables these activities is pre- broadband era, developing and pass-
cisely what makes broadband an “in- ing bipartisan legislation that en-
formation service” under the stat- sures the open internet, protects
ute. It is impossible to make use of consumers and maintains invest-
popular video-rich information ap- ment in the nation’s high-speed
plications on today’s internet using broadband networks.
old-fashioned dial-up access because
of the need for higher speeds and Mr. Mehlman, a lobbyist, served as
lower latency. assistant commerce secretary for
As it turns out, the FCC had it technology policy in the George W.
right for nearly 20 years. The long- Bush administration.
 For personal non-commercial use only. Do not edit or alter. Reproductions not permitted.
To reprint or license content, please contact our reprints and licensing department at +1 800-843-0008 or www.djreprints.com
A12 | Monday, September 4, 2017 THE WALL STREET JOURNAL.

LIFE & ARTS

Nina Cheng plays pickup games at

James J. Walker Park in New York’s
Greenwich Village neighborhood once
a week.

last September once every two

weeks is the norm.
“Squash is a great way to be so-
cial in New York City,” she says.
She meets friends before or after
work for 45-minute games. “I have
more lower-body strength, so
squash helps work my upper
body,” she says.
PETER FOLEY FOR THE WALL STREET JOURNAL

She uses a longboard skate-

board to commute around Manhat-
tan and tries to go kitesurfing
three to four times a year.

The Diet
Ms. Cheng starts her day with tea
and eggs she gets from her
mother, who lives in Milford,
Conn. “My mom has chickens, so I
have a nonstop supply of eggs,”
she says. She eats lunch at home,
usually steamed vegetables with
WHAT’S YOUR WORKOUT? | By Jen Murphy olive oil and Sriracha. She snacks
on fruit throughout the day.
She dines out most nights. “I

She’s Sticking With Field Hockey love good food and have an eat-
something-delicious-and-work-off-
the-calories-later mentality,” she
says. Her favorite splurges are
malty beers, the ricotta and beet
After playing the sport in college, a designer finds the game she loves in the middle of New York donut at the Doughnut Project and
the black label burger from Mi-
NINA CHENG may design feather Manhattan in 2008, she joined a particularly likes the skills chal- netta Tavern. She has a pint of
earrings and fur-covered iPhone gym. “I found it frustrating to be lenge of field hockey. game. Plus, she says, “you’re con- Sambazon açaí sorbet almost
cases, but don’t call her girlie. The around people purely working out “It’s a very three-dimensional stantly in a crouched position, so nightly. She takes collagen supple-
founder of Wild and Woolly acces- for vanity,” she says. She tried sport,” she says. “You can only use you really work your glutes and ments.
sories isn’t scared of grass-stained group classes but balked at the one side of the stick, but you can core. If I haven’t cross-trained that
knees or bruised shins when she price. “A lot of classes cost $40 for do so much with it, like lift the week, I’m extremely sore after a The Gear & Cost
plays the sport she loves, field 40 minutes, and the workouts, like ball into the air or do a dribble game.” On weekends she goes to a Her JDH X79 TT Low Bow stick re-
hockey. spinning, were so stationary. I’d move and lift the ball over your park to practice dribbling, shoot- tails for $395. Her Dita turf shoes
Ms. Cheng knows how to handle rather be doing something more opponent’s stick. You don’t get ing and stick work. cost $65. She wears Nike tennis
a stick. She played field hockey, ice dynamic and exhilarating.” that creativity in spin class.” She plays pickup games year- skirts ($50). Club dues are $10 a
hockey and lacrosse in high school Craving the camaraderie of col- round and usually competes in re- game.
and one year of Division I field lege sports, Ms. Cheng, 31, joined The Workout gional and national competitions
hockey at Colgate University, in the Greenwich Field Hockey Club Ms. Cheng plays coed pickup field as well. The pickups games move The Playlist
Hamilton, N.Y., as well as a season in New York City, and took up hockey games with her club once a indoors for games during winter “I don’t like music with a lot of
with the Hampstead and Westmin- squash, a sport she played her se- week at James J. Walker Park in months. lyrics,” she says.
ster Hockey Club in London. nior year of college. Ms. Cheng Greenwich Village. Playing forward Ms. Cheng was playing squash Techno and electro-pop bands
When she transitioned from col- says both sports challenge her like she does can be exhausting. two to three times a week, but like Berlin are on her workout
lege to her professional career in hand-eye coordination. But she She keeps running most of the since launching Wild and Woolly playlist.

Weather The WSJ Daily Crossword | Edited by Mike Shenk

Shown are today’s noon positions of weather systems and precipitation. Temperature bands are highs for the day. 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 Down 55 Square root of
-15 sechzehn
19 20 21 22 1 City whose population
-10 triples once a year 58 Delivers by the
23 24 25 26 wagonload
Riga -5 2 Gabriel Byrne’s
“Excalibur” role 59 Dr. McCoy’s first name
Glasgow
asgow
g
0 27 28 29 30 31
osco
Moscow 3 Embarrassing outburst 60 Factual in every detail
Co
C p h g
Copenhagen 5 32 33 34 35 36 37
4 Greek consonants 61 Jazz band members
10 38 39 40 41 42 5 Start of a Midwestern 63 Academic
15 state capital name 64 Blows up
D bli
Dublin 43 44 45 46 47 48 49 50
li
Berlin 6 Marjoram’s cousin 65 Dern and Linney
A t d
Amsterdam 20
51 52 53 54 55 7 Unpleasantly bitter 68 Resort setting
arsaw
Warsaw 25 8 Beyond bitter
London
Lond 56 57 58 59 60 61 69 Minos and Ariadne, e.g.
Brussels 30 9 Lemon
k
Frankfurt Prague e
Kiev 62 63 64 65 66 70 Fancy affair
35 10 Turning jump
73 Fancy affair
Munich
i h 67 68 69 70 11 Dresses down
Paris 76 ___ Lodge
Vienna
V 12 Feature of “guilt” but (motel chain)
Warm 71 72 73 74 not “gilt”
Budapest
Budape
d p 13 Earn a 77 Hikes
Geneva Cold 75 76 77 78
restraining order, 78 Brewpub choices
Milan 79 80 81 82 perhaps 80 Star of 1953’s
h
Bucharest Stationary
83 84 85 86 87 88 89
14 Election lead-up “Calamity Jane”
15 Canadians’ 81 Spiky flower popular
Showers 90 91 92 93 94 Thanksgiving with butterflies
Rome t b
Istanbul
mo. 83 Scammer’s words
95 96 97 98 99 100 101 102 103
Rain 16 Set’s crime against
Madrid
d id Osiris 84 Paper extension
104 105 106 107 108 109
17 Like the 1979 85 Like some dungeon
Lisbon
L b denizens
T-storms 110 111 112 113 114 gas crisis rationing
115 116 117 118 18 Some country dancers 87 “Sir, I love you more
Al i
Algiers T i
Tunis Athens
Ath than
Snow 24 Knock quite a few back words can wield the
119 120 121 122
26 Smallest of the ratites matter” speaker
Flurries 30 Cointreau flavoring 88 “It’s a long story”
Rabat
b
AUDIO DETAILS | By Tracey Gordimer 34 Finished a deck 91 One of a sinful septet
Ice 37 Brat’s opposite 94 Fails miserably
Across 50 Group of families, in 86 Wearing an 39 Iowa State setting
Today Tomorrow Today Tomorrow 96 Bother a bedmate
Global Forecasts City Hi Lo W Hi Lo W City Hi Lo W Hi Lo W 1 Task that can’t
ancient Rome ultra-sheer outfit?
89 Beastly abode
41 Magician’s props 98 Skybox setting
be ignored 51 Sambuca flavoring 42 Parish constables
s...sunny; pc... partly cloudy; c...cloudy; sh...showers; Geneva 22 12 c 25 13 s Ottawa 24 14 r 22 9 c 90 Jeremy of 99 Boudoir wear
t...t’storms; r...rain; sf...snow flurries; sn...snow; i...ice 7 Work commissioned 53 Some kitchen compost 43 Wonder drug
Hanoi 33 27 c 34 26 t Paris 22 15 pc 22 13 c by the khedive “The Hurt Locker” 101 Breastplate’s place
54 Roof rim 44 Animal opposite the
Havana 31 23 pc 32 23 pc Philadelphia 29 20 s 31 21 s of Egypt 92 Charlton’s “Touch of English lion 102 Confectioner H.B.
Today Tomorrow Hong Kong 31 28 r 32 27 c Phoenix 41 29 pc 42 29 pc 56 Frasier’s brother Evil” director on the Royal Arms 103 Rear-___ (driving
11 Ger. invaded it in June
City Hi Lo W Hi Lo W Honolulu 30 22 sh 30 23 pc Pittsburgh 28 19 s 23 14 t 1941 57 Grazing spot 93 Prepare to be shot 45 Attacks with a lance mishap)
Amsterdam 22 14 c 21 13 c Houston 33 22 pc 33 22 pc Port-au-Prince 35 24 pc 34 23 pc 15 Smell 95 Local group 47 Do some voice work 106 Way off
58 C changers
Anchorage 16 10 sh 15 11 sh Istanbul 27 20 s 26 19 s Portland, Ore. 37 20 s 39 21 pc 19 Goya, e.g. 96 Irritated state 48 “I Told You So” singer 107 You can bank on them
62 Division d’un ballet Randy
Athens 31 22 s 30 22 s Jakarta 33 25 pc 33 24 t Rio de Janeiro 27 18 s 28 19 s 97 Chemise material 111 Garden visitor
20 Puzzling problem 63 Starts a set
Atlanta 30 20 s 29 19 pc Johannesburg 22 7 s 23 8 s Riyadh 43 25 s 42 26 s 49 Ramone who wrote 113 Single, say
21 Fillable bread 100 A bit over 4,000 square “Rockaway Beach”
Baghdad 45 27 s 46 26 s Kansas City 33 15 s 24 10 pc Rome 25 16 pc 27 16 s 65 Tureen accompanier meters 114 Florida Georgia Line,
22 Surrender 52 Come across as for one
Baltimore 29 19 s 31 18 s Las Vegas 39 27 s 41 27 pc Salt Lake City 36 19 s 34 19 s 66 Manning in MetLife 104 Knight’s title in “Game
Bangkok 34 26 pc 34 26 t Lima 19 15 pc 20 15 pc San Diego 26 21 pc 26 21 pc 23 Muenster monger’s Stadium of Thrones”
Beijing 29 21 pc 30 17 pc London 22 15 pc 22 11 sh San Francisco 27 19 pc 26 18 pc business? 67 Attack by space 105 Redgrave with an Previous Puzzle’s Solution
Berlin 19 11 pc 21 13 pc Los Angeles 30 21 pc 29 20 pc San Juan 32 26 sh 32 27 sh 25 Result of an offshore invaders? Oscar, a Tony and a pair WA F T S S C A L P A B A
oil leak? of Emmys AM O R E C AM E O P A M
Bogota 21 7 pc 21 8 pc Madrid 30 16 s 32 18 s Santiago 17 3 s 19 4 pc 69 Retirement watch,
108 Charter S P R I N G A R B O R E N O
Boise 38 18 s 36 19 s Manila 33 25 t 32 26 r Santo Domingo 32 24 pc 33 24 pc 27 Rand division perhaps? P U G D E M I N T E N D S
28 Manner of moving 109 In that case S P O U S E I A N
Boston 27 19 s 30 19 s Melbourne 12 6 sh 11 7 sh Sao Paulo 27 14 s 27 14 s 71 Victorian, e.g.
F O R MA L MO T I O N
Brussels 20 15 c 22 13 c Mexico City 19 13 pc 21 14 pc Seattle 31 18 s 34 19 pc 110 Mustang and Taurus?
29 Rhineland siren 72 Prevents access to A D D O N O N I O N N B A
Buenos Aires 15 7 c 17 9 s Miami 32 27 pc 33 27 pc Seoul 28 19 s 26 19 c 112 Something that won’t L O I S R O G E N P E O N
31 Frame of Felix, e.g. 73 Savage sorts sprout if it’s planted?
Cairo 36 24 s 36 23 s Milan 25 14 pc 27 16 s Shanghai 30 25 c 34 25 t E N D C A R E T A T S E A
32 Geometry calculation 74 Pay to play 115 Lion’s pride C A B B A G E R O L L S
Calgary 20 6 s 24 9 s Minneapolis 23 11 pc 18 9 sh Singapore 30 25 c 30 26 t A R M O L D S A W
Caracas 32 25 pc 32 26 pc Monterrey 31 20 pc 30 19 pc Stockholm 14 11 r 17 8 pc 33 Where potatoes were 75 Serengeti grazer 116 “Ritorna vincitor!” for A C T R E S S L O U A D O
first cultivated one F I T L I K E A P R A Y E R
Charlotte 31 17 s 32 21 pc Montreal 25 16 pc 23 12 c Sydney 22 11 s 19 11 s 77 Stands for funerals
Chicago 29 15 t 22 10 pc Moscow 17 7 c 14 7 r Taipei 33 26 t 33 27 pc 35 Smelly 117 Care A T L O R I O N E L S E S
78 Frighten R Y E T E N S E S T O R E
Dallas 34 24 pc 32 18 pc Mumbai 31 26 pc 30 26 pc Tehran 34 23 s 34 23 s 36 Dispense with 118 Word on some franc
79 Manxman, e.g. notes The contest answer is SWEDEN. The answer to each
Denver 33 12 s 21 8 pc Nashville 31 20 s 27 15 t Tel Aviv 32 25 s 32 25 s 38 Settled
80 One might be chased 119 Different of the four asterisked clues is the type of word
Detroit 29 16 t 23 11 c New Delhi 34 27 t 34 26 t Tokyo 26 20 c 27 22 pc 40 Distinguishing feature by its owner
Dubai 41 32 s 41 32 s New Orleans 31 23 pc 29 23 pc Toronto 26 13 pc 21 11 c 120 Bank hidden in one of the theme entries. From top to
42 Report holder 82 Cowboy star Lash
Dublin 20 12 pc 17 10 c New York City 29 21 s 31 20 s Vancouver 27 16 s 28 18 pc 121 Hotel visit bottom: (Greta) GARBO was an ACTRESS; MALMO
43 Call’s counterpart 83 Rascal Flatts, is a CITY; ABBA was a BAND; and IKEA is a STORE.
Edinburgh 19 11 r 16 9 r Omaha 30 13 pc 23 10 pc Washington, D.C. 30 22 s 31 21 s 122 Teacher of TV’s
Frankfurt 22 11 pc 24 15 pc Orlando 32 23 pc 32 24 t Zurich 21 11 pc 24 14 pc 46 Snowboarding bro? for one “Sweathogs” All of the hidden names originated in Sweden.

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BUSINESS & FINANCE
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Euro vs. Dollar 1.1880 g 0.25%
Fall in Yields Hits Banks
BY CORRIE DRIEBUSCH
U.S. bank stocks dropped in
August as interest rates
slipped, and some money man-
agers say lenders have farther
to fall.
The reason: The yield on
the 10-year Treasury note is
back down to where it was in
mid-November, shortly after
the election, but bank shares
are above where they were at
that time.
That could be a warning
sign, some analysts and inves-
tors say, that there is still too
much optimism priced into
shares of financial companies.
Such stocks have benefited
EVGENIA ARBUGAEVA FOR THE WALL STREET JOURNAL
Visitors inspect a model of the dam at Krasnoyarsk Hydroelectric Plant. There is a surplus of cheap electricity available in Russia.
Siberia Is Primed for Digital Era
En+ harnesses Soviet-era infrastructure in frigid region to develop its data-storage project
BY JAMES MARSON
IRKUTSK, Russia—As Presi-
dent Vladimir Putin drives this
country to leap into the digital
age, the cold temperatures and
powerful rivers of Siberia have
become an asset for one well-
placed company.
Here in southern Siberia, en-
ergy-and-aluminum giant En+
Group has entered the data-
storage market, feeding on in-
dustrial-scale power plants for
equipment that runs hot and
needs to be kept cool.
“It’s the ideal location,” said
Chief Executive Maxim Sokov.
“Power is cheap, and the cool-
ing is free.”
Siberia’s rivers have for de-
cades generated electricity for
Russia’s aluminum industry, the
second-largest after China’s.
With electricity output exceed-
ing demand, En+ is harnessing
the excess, establishing a cen-
ter here in May that it envi-
sions as the first in a network
of modules under the brand
HEARD ON THE STREET | By Spencer Jakab
Jobs Report Gives Boost to Doves
Economists
are famously
said to worry
whether what
works in prac-
tice will also
work in theory. Friday’s
modestly disappointing jobs
report should put their
minds at ease for now.
Before the revisions in
August’s report, five of the
seven months through July
had seen payrolls growth of
more than 200,000 and the
average of the preceding 12
months had been a robust
180,000—high figures so late
in an economic recovery. Ac-
cording to a calculator main-
tained by the Federal Re-
serve Bank of Atlanta, a
pace of just 166,000 jobs a
month for the next 12
months would have taken
TECHNOLOGY: ALEXA, SIRI AND RIVALS BATTLE FOR THE HOME B4
FTSE 100 7438.50 À 0.11%
from hopes for looser regula-
tion under the Trump admin-
istration and from passing
their Federal Reserve stress
tests, which won big U.S.
banks the ability to buy back
stock and distribute dividends.
Strong earnings reports have
lifted large banks’ price-to-
book valuations since Novem-
ber, as well.
“People are hanging onto
bank stocks hoping for a regu-
latory reprieve,” said Justin
Wiggs, managing director in
equity trading at Stifel Nico-
laus. “But from an operating
standpoint, there are obviously
concerns for banks,” he said,
referring to falling bond yields.
“Clouds of Siberia.”
Mr. Putin has called for the
Russian economy to go digital,
and demand is increasing from
state bodies that handle the
data of Russia’s gigantic bu-
reaucracy.
En+ isn’t the only company
hoping to capitalize on Soviet-
era infrastructure in the digi-
tal era. Rosenergoatom, the
state nuclear-power generator,
said it is planning to open a
data center at its Kalinin Nu-
clear Power Station, northwest
of Moscow, in 2018.
En+, which is considering
an initial public offering, ac-
cording to people familiar
with the matter, is also look-
ing at export potential. The
company is in talks with Chi-
nese, South Korean and Japa-
nese companies to store their
data, according to Aleksandr
Sgrebny, who heads the com-
pany’s data-center drive.
A link to China, just a few
hundred miles from Irkutsk,
would fit Russia’s broader eco-
the unemployment rate be-
low the 4% mark—a number
not seen since the start of
this century, at the apex of
the tech boom.
In that sense, then, Au-
gust’s payroll growth of just
156,000 and downward revi-
sions to the past two months
are a pause that refreshes.
That could be seen immedi-
ately in the currency market
as the dollar, which already
was in a rut, fell sharply.
There might normally be
two reasons for such a
move—either a shockingly
weak figure that raised ques-
tions about the fundamental
vigor of the U.S. economy or
a more benign one that
could influence the path of
monetary policy, making U.S.
bonds less tempting to for-
eigners. Friday’s slightly
THE WALL STREET JOURNAL.
Gold 1324.50 À 0.63%
The 10-year Treasury yield
fell to 2.122% on Thursday, its
lowest since Nov. 10, two days
after the presidential election.
The decline in the gap
between long- and
short-term U.S. rates
is bad for lenders.
The recent declines have
narrowed the gap between
long- and short-term rates,
which doesn’t bode well for
banks, which earn money on
500 miles
500 km
R U S S I A Irkutsk
Moscow
THE WALL STREET JOURNAL.
nomic strategy of providing
goods and services to its neigh-
bor’s growing economy amid
tensions with the West.
Mr. Sgrebny said the com-
pany is also talking to financial
institutions, research institutes
and bitcoin miners, which use
power-hungry computers to
generate the digital currency.
Addressing the interna-
tional reputation of Russian
hackers, the company said the
Irkutsk data-storage facility
has the second-highest rating
on an international scale for
physical and network security
and reliability.
Data centers tend to be built
weak figure—the miss of
23,000 jobs compared with
economists’ consensus is
well within the statistical
margin of error—is clearly a
case of the latter.
Another blowout jobs
number might have under-
cut doves on the Federal
Open Market Committee
who would like to slow
down the pace of interest-
rate increases until there
are signs of stronger wage
growth and inflation. After
all, unemployment already
is at the theoretical level
that sparks price pressure.
But if payroll growth is in-
deed cooling off then the
Fed can focus on hard data
without worrying about la-
bor market slack and could
well be on hold for the rest
of 2017.
WTI crude 47.29 À 0.13% German Bund yield 0.383%
the difference between what
they pay on deposits and what
they charge to lend money.
The difference between the
yield on the two-year Trea-
sury note and the 10-year was
at 0.812 percentage point late
Friday, below the 1.21-per-
centage-point differential on
Nov. 10 and near its smallest
since 2007.
The KBW Nasdaq Bank in-
dex of large U.S. lenders fell
3.1% in August but closed the
month up 14% since Nov. 10.
“I was a little surprised
banks aren’t down more,” Mr.
Wiggs said. “We should be a
bit more cautious.”
Please see STOCKS page B2
near the sources of demand,
but improved network speeds
and computing infrastructure
mean companies can look fur-
ther afield. The equipment is
best kept in rooms at around
70 degrees—often requiring ex-
pensive, energy-intensive cool-
ing systems. Iceland, too, is
touting its cheap energy and
cool climate as natural advan-
tages for its own data centers.
In Irkutsk, the average an-
nual temperature is just above
freezing. Even in the mild
summers, the world’s largest
freshwater lake, Baikal, acts
like a cooling system, Mr.
Sgrebny said.
En+ says all the necessary
infrastructure is in place for
Clouds of Siberia, and that it
will charge 25% to 40% less
than its rivals in Moscow,
where land and electricity are
more expensive.
The company, controlled by
billionaire tycoon Oleg Deri-
paska, generates around 8% of
Please see DATA page B4
Betterment CEO Learns to Let Go
BY MICHAEL WURSTHORN
The 220 people who work
for robo adviser Betterment
LLC gather in the New York
company’s cafeteria twice a
year to hear from their chief
executive officer.
There, Jon Stein, a 38-year-
old former bank consultant, of-
ten has addressed one of their
biggest beefs with him: Even
after years of trying to rein in
his own worst habits, Mr. Stein
remained a micromanager.
Mr. Stein sometimes was
“sticking his nose in when he
wasn’t being productive,” said
Eli Broverman, who co-
founded Betterment with Mr.
Stein in 2008.
“Maybe it’s particularly
tough for me because I built
this company,” Mr. Stein said.
“The first lines of code were
mine. I’m intimately familiar
with all the workings of it.”
Charging In
Private-equity firms are boosting investment in U.S. addiction-treatment
facilities, drawn by soaring demand. Their spending has helped increase
the number of providers.
Total private-equity deal value
$3.0 billion
2.5
2.0
1.5
1.0
0.5
$11.4M
0 0
2011 ’12 ’13 ’14
Sources: PitchBook (deal value); IBISWorld (providers)
Investors Pile Into
Opioid Treatment
BY JEANNE WHALEN
AND LAURA COOPER
Private-equity firms are
moving into a new business
opportunity: the opioid addic-
tion crisis.
Drawn by soaring demand,
expanded insurance coverage
and the chance to consolidate
a highly fragmented market,
firms plowed $2.9 billion into
treatment facilities last year,
up from $11.4 million in 2011,
according to the research firm
PitchBook Data Inc. The num-
ber of private-equity deals
rose to 45 from 25.
The firms are acquiring or
expanding clinics that provide
everything from detox and
residential care to outpatient
and methadone treatment. In
some cases, private-equity
firms have approached not-
for-profit outfits in an attempt
to buy and convert them to
for-profit entities, say treat-
ment-center executives.
Private equity has become
the “driving force” in growth
in methadone clinics over the
past 10 years, according to
Mark Parrino, head of a clinic
trade association. While a de-
cade ago roughly 60% of the
clinics were nonprofits, today
nearly 60% are for-profit enti-
ties, he said.
Some nonprofit treatment
veterans look with skepticism
at the new profit-seeking in-
vestors. “There are some very
good private, for-profit
groups,” says Dick Steinberg,
president of WestCare Founda-
tion, a nonprofit provider of
addiction treatment and other
services in 18 states. Others
“are going to invest in it, mar-
ket it, get people in, and I’m
not sure the quality of treat-
ment will last,” he said.
Mr. Steinberg says he has
turned down frequent inqui-
ries from private-equity inves-
tors interested in buying
WestCare facilities. “When you
see these health crises happen
people see a dollar as opposed
to how to really help some-
body,” he said.
Private-equity firms say
they are bringing capital to an
industry that badly needs in-
vestment, helping increase the
number of treatment facilities.
Nonprofits “don’t have the
Jon Stein, chief executive of
robo adviser Betterment LLC.
Mr. Stein wants to do to fi-
nancial services using technol-
ogy and automation what com-
panies such as Amazon.com
Inc. have done to brick-and-
mortar retailers. His mission is
to make investment advice and
financial services broadly ac-
Monday, September 4, 2017 | B1
10-Year Treasury yield 2.157%
Number of providers
3,000
2,500
2,000
1,500
1,000
500
’15 ’16 2011 ’12 ’13 ’14 ’15 ’16
THE WALL STREET JOURNAL.
capital to have the best com-
pliance, services and market-
ing,” says Simon Bachleda,
managing partner of Revel-
stoke Capital Partners, which
owns a majority stake in an
operator of two dozen metha-
done clinics—some acquired
and some built from scratch.
“Usually we enhance the ser-
vice offering.”
Among recent deals are
Kohlberg & Co.’s $180 million
acquisition of The Meadows, a
rehab center in Wickenburg,
Ariz., best known for treating
Olympic swimmer Michael
Phelps after his 2014 DUI ar-
rest. Investors including LLR
Partners, HealthInvest Eq-
uity Partners, NewSpring
Capital, Petra Capital Part-
ners and SV Life Sciences
spent $34 million last year for
a stake in Sun Behavioral
Health, which runs free-stand-
ing psychiatric hospitals that
treat addiction and other con-
ditions. Private-equity firm
Flexpoint Ford acquired and
expanded Summit Behavioral
Health and is now considering
a sale of the firm, which oper-
ates in 10 states.
The demand for treatment
is plain. Drug overdose deaths
have soared since the late
1990s, and now cause more fa-
talities each year than traffic
accidents, according to the
federal Centers for Disease
Control and Prevention. Wide-
spread opioid addiction is
largely to blame for the surge,
the CDC says.
U.S. drug- and alcohol-ad-
diction clinics generated $9.5
billion in revenue in 2016, up
from $7.5 billion in 2011, ac-
cording to the Los Angeles-
based data provider IBIS-
World. There were 2,902
enterprises engaged in drug
and alcohol rehabilitation in
2016 compared with 2,435 in
2011, the data firm said.
Investors say legislation has
also made the sector more at-
tractive by extending insur-
ance coverage to more Ameri-
cans. The Mental Health Parity
and Addiction Equity Act of
2008 required insurers that
provide mental-health benefits
to cover them as favorably as
they do physical-health bene-
fits. The 2010 Affordable Care
Please see OPIOID page B2
cessible, while also lowering
the cost and removing the
compensation conflicts that in-
vestors sometimes grapple
MICHAEL BUCHER/THE WALL STREET JOURNAL
with when working with a fi-
nancial adviser.
Mr. Stein’s do-it-all mind-
set has been a key factor be-
hind Betterment’s success in
delivering financial advice to
investors. He has shaped a
wealth-management business
that one day looks to go public
and become a household name.
Betterment relies on algo-
rithms that gauge an investor’s
risks and goals to recommend
cheap, long-term investments.
Through its app and website,
the firm suggests a basket of
exchange-traded funds for in-
vestors, rebalances portfolios
and offers securities sale strat-
egies to minimize tax bills.
But Betterment clients pay
less than half of the typical fi-
Please see STEIN page B2
For personal non-commercial use only. Do not edit or alter. Reproductions not permitted.
To reprint or license content, please contact our reprints and licensing department at +1 800-843-0008 or www.djreprints.com
B2 | Monday, September 4, 2017
INDEX TO BUSINESSES
These indexes cite notable references to most parent companies and businesspeople
in today’s edition. Articles on regional page inserts aren’t cited in these indexes.
A HP................................B8
Alpargatas S/A Pref...B4
Alphabet Inc. Cl C.......B4
Amazon.com ............... B4
Apple......................A1,B4
B J
Banque Internationale
è Luxembourg...........B8
Betterment ................. B1
C Lenovo Group..............B8
Calvin Klein.................A8
Celgene........................B2
F Microsoft.....................B4
Federal Reserve Bank
of Atlanta.................B1
Fiat Chrysler
Automobile...............B3
Ford Motor.............B3,B4
G Novartis.......................B2
General Motors...........B3
H
Havelock London.........B5
Honda Motor...............B3
Houston Health
Department..............A7
INDEX TO PEOPLE
B
Beddall, Matthew.......B5
Bolloré, Vincent..........B8
C
Charles, Brandon ........ B5
F L-M
Federighi, Craig...........B4
G Musk, Elon..................B4
Genter, Daniel.............B2
Gruber, Tom................A1
Eye on the Divide
The slimming differential between Treasury notes doesn't bode well
for banks despite rising share prices since the election.
The gap between 2-Year Treasury yield
long- and 3%
short-term rates is
narrowing again.
2 AHEAD
1 vised version of its Leaf all-
0
2015
Bank stocks fell in 100
August, but
remain well above
their pre-election 90
levels.
KBW Nasdaq Index
80
70
Sources: Ryan ALM (yield); FactSet (stocks)
STOCKS
Continued from the prior page
Daniel Genter, chief execu-
tive officer of RNC Genter
Capital Management, an in-
vestment-management firm in
Los Angeles, said he has been
decreasing his position in fi-
nancial stocks, saying that as
the yield curve flattens, banks
will likely need stronger de-
posit growth in order to main-
tain their profitability levels.
“That’s going to be a chal-
lenge,” he said.
The big question now for
banks is the U.S. economy.
While the global economy con-
tinues to hum along, there are
some cracks in the U.S. House-
hold debt reached a record
last quarter, inflation remains
stubbornly low and gross-do-
STEIN
Continued from the prior page
nancial-adviser fee of as much
as 1% of portfolio assets. Mr.
Stein said the firm isn’t en-
cumbered with hundreds of
branches and hefty salaries for
thousands of brokers.
The firm’s success—it has
more than 250,000 clients—
has spawned a raft of rivals,
ranging from upstarts such as
Wealthfront Inc. to Wall Street
giants. Industry veterans say
the onslaught of competition
will make the firm’s next chap-
ter that much more challeng-
ing. “It’ll be about having a
clear vision of the best way to
serve customers,” Mr. Brover-
man said.
Along the way, Mr. Stein has
had to grow into his CEO role
and learn how to trust his em-
ployees, according to himself,
colleagues and mentors, some
of whom are investors in his
company.
“There’s an easygoing exte-
rior,” said Jim McCormick,
chairman of First Manhattan
Consulting, where Mr. Stein
worked following graduation
from Harvard University in
2001 with a degree in econom-
ics. That shell “hides a very
demanding internal drive.”
Rosenergoatom...........B1
Huawei Technologies..B4 S
I Samsung Electronics..B4
International Energy Sears Holdings............B4
Agency ...................... B2 Social Finance.............B5
Sony.......................B4,B8
JBS SA........................B4 SUN Behavioral
L Health ....................... B1
Legend Holdings.........B8 T
Takata..........................B3
LG Electronics.............B4 Tesla............................B4
M Toyota Motor..............B3
U
N Uber Technologies ...... B8
New York Global United Rusal...............B4
Group.........................B5 U.S. Bureau of Labor
New York Times.........B4 Statistics .................. B3
Nissan Motor.........B2,B3 U.S. Environmental
Protection Agency....A7
P V
Pfizer...........................B2 Vivendi ........................ B8
Precision Capital.........B8 W
PVH.............................A8 Wal-Mart Stores.........B4
R Warner Music.............B8
Roku ............................ B5 Winton Group ............. B5
H
Hatch, Orrin................A5
Huefner, Felix ............. B7
K
Salakhutdinov,
S
Ruslan.......................A2
T
Khan, Hamza...............B8 Taylor, Tom..................B4
Trump, Donald............A5
Land, Kate...................B5 W earlier issues relating
Wey, Michaela ............ B5
O Whitman, Meg............B8
Obama, Barack............A5 Wren, Alisdair.............B5
10-Year Treasury yield
2016 2017
Nov. 8: U.S. election
2016 ’17
THE WALL STREET JOURNAL.
mestic-product growth has
been choppy.
Those concerns have con-
tributed to the decline in the
10-year yield, which ended
July at 2.292% and finished
2016 at 2.446%.
Still, not everyone is so
dour about the outlook for
bank stocks.
Michael Mattioli, portfolio
manager at Manulife Asset
Management, said he isn’t as
bullish on bank stocks as he
has been in the past, and said
he has trimmed his bank-stock
exposure since the election.
Yet he still believes there
could be some upside to the
group.
“There’s a lot more things
that can go right for banks
than can go wrong,” he said,
such as a change to lenders’
capital requirements or a tax
overhaul.
In the years after Better-
ment’s launch, brokerage exec-
utives said the emergence of
robo advisers wasn’t a threat.
That mind-set has changed
over the past year or so as tra-
ditional brokerages such as
Bank of America’s Merrill
Lynch and Morgan Stanley, as
well as others like Charles
Schwab Corp., have worked on
launching their own robo-advi-
sory services.
Betterment’s $800 million
valuation, provided by inves-
tors such as Bessemer Venture
Partners and Kinnevik AB, has
risen as robo advisers have
collected more assets. Re-
searcher Cerulli Associates es-
timates the robo-advice indus-
try had more than $80 billion
in assets by the end of 2016,
and will have $385 billion in
the next five years, eating into
the multitrillion-dollar asset
base of traditional brokerage
firms.
While Mr. Stein says he has
gotten better at delegating
tasks to the various teams that
report to him, he still keeps a
hand in activities such as an-
swering customer-service calls
several times a year—some-
thing all employees of Better-
ment have to do, too.
“It’s one way of creating a
connection with the people we
serve,” he said.
The auto maker was one of the first to release an all-electric vehicle. Now, its Leaf is largely overshadowed by brands like Tesla.
Nissan to Launch New Leaf
Revamped version of
electric car addresses
to range figures, style
BY SEAN MCLAIN
TOKYO—Nissan Motor Co.
was a path-breaker in electric
vehicles for the mass market,
but for nearly seven years the
masses mostly ignored it.
This week, Nissan hopes to
inspire car buyers to turn to
their new Leaf.
THE WEEK On Tuesday
in the U.S., the
company will
release a re-
electric car that will travel far-
ther on a charge and add
autonomous-driving features
while keeping the relatively
low price of the current
model, which starts at
$30,000.
“We have high expectations
for the new Leaf,” Nissan Chief
Executive Hiroto Saikawa told
shareholders in June, describ-
ing it as the core of the com-
pany’s strategy to persuade
average customers to adopt
next-generation vehicles.
For all the hype about elec-
tric vehicles, they still repre-
sent only roughly 1% of the
global market, according to
International Energy Agency
estimates. That isn’t what Nis-
san expected when it intro-
duced the inaugural version of
the Leaf in December 2010.
At the time, Carlos Ghosn,
the head of the alliance that
Pfizer Revives Drug at Higher Price
BY PETER LOFTUS
Pfizer Inc. is bringing back
a cancer drug it pulled from
the U.S. market over safety
concerns in 2010—but the drug
this time carries a higher cost,
in the latest sign of the indus-
try’s pricing power.
Mylotarg, which treats a
form of leukemia, will cost
$24,600 per patient for an aver-
age course of treatment, Pfizer
said Friday after the Food and
Drug Administration approved
the product’s comeback. Pfizer
says most patients will receive
only one course. The new price
is 58% higher than the $15,522
cost for the drug when it was
pulled in 2010.
Drugmakers have taken heat
from politicians, patients and
health insurers for charging
high prices for new drugs and
raising prices of older drugs in
recent years. This week, the
FDA approved a pioneering
leukemia treatment from No-
vartis AG that costs $475,000
per patient, which some critics
termed excessive but which the
company defended as a respon-
sible price in light of the treat-
ment’s benefits.
Pfizer says the new price for
the resurrected Mylotarg
OPIOID
Continued from the prior page
Act also expanded coverage by
mandating that ACA insurance
plans sold to individuals cover
mental-health treatment. The
law also said children could be
covered under their parents’
insurance until age 26.
“The Affordable Care Act
created more insured lives.
That combined with the opioid
BUSINESS & FINANCE
Slowing Down
Sales of Nissan's Leaf have slowed as the number of electric cars
overall has grown.
Annual sales of major electric models since their launch date
Nissan Leaf
60,000
40,000
20,000
59
50
0 Leaf, despite the higher price.
2010 ’17 ’12
*Tesla sales figures for year 2012, 2016 and 2017 are approximate
Note: 2017 sales through July 13. Renault sales through June.
Source: the companies
includes Nissan and Renault
SA, predicted the two compa-
nies would sell a cumulative
1.5 million electric vehicles by
2016, led by the Leaf. He also
predicted that electric vehicles
would account for 10% of
global sales by 2020.
The actual cumulative fig-
ure to date: 490,000.
What happened? Low gaso-
line prices were one factor
keeping a lid on demand for
environmentally friendly vehi-
cles, but the original Leaf had
its own problems. Its range,
even after updates, was only
107 miles on a full charge,
making it ill-suited to road
trips. The style touches also
never really caught on, with
The Wall Street Journal’s Dan
Neil raising his eyebrows at
“the biggest, most ridiculous
doesn’t look as steep once in-
flation is factored in. Account-
ing for average annual U.S.
medical-price inflation of about
3% as calculated by the govern-
ment, the 2010 price would be
about $19,128 in today’s dollars,
Pfizer said.
Company spokeswoman
Sally Beatty added that the in-
flation rate for branded drugs
is significantly higher by some
estimates.
Ms. Beatty said the com-
pany arrived at the new price
after consulting with doctors,
insurers and patients to as-
sess the drug’s clinical and
Drugmakers have taken heat after raising prices for medications.
crisis has changed the fabric
of what we’re seeing in these
treatment centers,” says
Hunter Peterson, a partner at
Riverside Co., which recently
bought Florida treatment pro-
vider Lakeview Health LLC
from another private-equity
firm, Trinity Hunt Partners,
and plans to expand it to
Houston and other markets.
Lakeview, like many pri-
vate-equity-backed treatment
providers, doesn’t accept Med-
icaid or Tricare, the taxpayer-
THE WALL STREET JOURNAL.
NOVODEREZHKIN ANTON/TASS/ZUMA PRESS
conventional gasoline-powered
family car.
The focus on performance
points to Nissan’s biggest
threat, one it didn’t face in
2010: a mass-market car from
Renault Tesla Tesla BMW Chevy Tesla Inc. Tesla has begun pro-
Zoe Model S* Model X* i3 Bolt duction of its $35,000 Model 3
sedan, a vehicle that has more
than double the range of the
current Leaf.
Around one-half million
212 people put down a $1,000 de-
311
posit to reserve the Model 3.
Meanwhile, Tesla’s Model S,
which starts at around
$70,000, is already selling
nearly as many vehicles as the
’17 ’12 ’17 ’15 ’17 ’13 ’17 2017 “Now if people think of
electric cars, they think of
Tesla,” said Julie Boote, an
THE WALL STREET JOURNAL. auto analyst at Pelham Smith-
ers Associates.
headlamps since the invention Another competitor is Gen-
of fire” and a rear end he com- eral Motors Co.’s Chevrolet
pared with a “soused diaper.” Bolt, which offers range on a
The new model is designed full charge of more than 200
to address those issues. Al- miles and a price tag starting
though Nissan hasn’t released at $37,000. GM delivered only
the improved range figures, it 9,500 to customers in the first
says the new Leaf will allevi- seven months of this year,
ate range anxiety in Europe partly because of limited avail-
and Japan, where commutes ability at dealerships.
are shorter on average than in For the moment, Nissan
the U.S. still enjoys a first-mover ad-
The vehicle will also come vantage in all-electric vehicles,
equipped with Nissan’s ProPi- given its experience and the
lot autonomous driving suite, lack of direct competition
which can navigate the vehicle from most auto makers. But
within a single lane and in
stop-and-go traffic. The new
Leaf will be the first model to
get Nissan’s self-parking sys-
that advantage might not last
long. Everyone from Toyota
Motor Corp. to Daimler AG’s
Mercedes-Benz plans to intro-
tem. And Nissan has hinted it duce electric cars.
will perform more like an elec- “In the future, they’re just
tric car than the old Leaf, one among many others,” said
which was tuned to resemble a Ms. Boote.
economic benefits. “Based on gene Corp.’s Idhifa and No-
clinical data and real-world vartis’s Rydapt, after many
evidence, and support from years without new treatment
oncologists, we believe My- options for the disease.
lotarg has the potential to The FDA first approved
provide meaningful improve- Mylotarg in 2000 to treat pa-
ment to the majority of pa- tients age 60 and older with a
tients with AML,” she said. type of AML. After the drug’s
The American Cancer Soci- 2000 approval, additional pa-
ety estimates there are about tient studies failed to confirm
21,380 new cases of acute its efficacy, and revealed an
myeloid leukemia—a particu- elevated risk of death of pa-
larly aggressive form of blood tients early in treatment. The
cancer—annually in the U.S., FDA requested that Pfizer
and about 10,590 deaths from
the disease. The FDA has re-
cently approved some new
drugs for AML, including Cel-
stop selling the drug in 2010.
After the withdrawal, inde-
pendent researchers tested
different doses and other
ways to make Mylotarg safer
and more effective, with
Pfizer providing the drug for
testing purposes, the com-
pany said.
The results, which showed
the drug improved certain
ERIK MCGREGOR/PACIFIC PRESS/ZUMA PRESS
measures of survival and in-
duced remission in some pa-
tients, led to Pfizer’s applica-
tion to bring the drug back to
market.
The FDA on Friday ap-
proved a lower dose than the
first version of Mylotarg, a
different dosing schedule and
in a slightly different patient
population that includes pe-
diatric patients.
financed insurance programs
for low-income people and ac-
tive-duty military members,
respectively. Those programs
ment, according to the Robert
Wood Johnson Foundation.
Private-equity’s move into
rehab “might not necessarily
offer reimbursement “below ease access issues for those on
our cost,” and the paperwork Medicaid,” says Michael Botti-
can be excessive, says Roy celli, executive director of Bos-
Serpa, Lakeview’s chief execu- ton’s Grayken Center for Ad-
tive. Lakeview’s patients are diction Medicine, which like
mostly covered by commercial many nonprofits does accept
insurance, he said. Medicaid. “But it does help
Medicaid is the largest overall access issues,” said Mr.
source of funding in the U.S. Botticelli, the former director
for mental-health care, includ- of the White House’s Office of
ing substance-abuse treat- National Drug Control Policy.
 For personal non-commercial use only. Do not edit or alter. Reproductions not permitted.
To reprint or license content, please contact our reprints and licensing department at +1 800-843-0008 or www.djreprints.com
THE WALL STREET JOURNAL.
PAUL SANCYA/ASSOCIATED PRESS
Firm’s air bags have been
linked to over a dozen deaths.
Honda
Reaches
Takata
Settlement
BY MIKE SPECTOR
Honda Motor Co. reached a
$605 million legal settlement
covering vehicles with rup-
ture-prone Takata Corp. air
bags, the latest auto maker to
agree to resolve claims in a
long-running safety crisis
linked to numerous deaths and
injuries.
Honda reached the settle-
ment over financial-loss claims
affecting current and former
owners and lessees of roughly
16.5 million vehicles in the U.S.
equipped with the air bags,
plaintiffs’ lawyers said on Fri-
day. The air bags risk explod-
ing and spraying shrapnel.
The settlement, which
doesn’t cover personal injury
claims, still requires a judge’s
approval as part of widespread
litigation consolidated in a Mi-
ami federal court.
Honda will ultimately pay
$484 million after receiving a
20% discount on the settle-
ment amount in consideration
of the auto maker’s current re-
call efforts, which include pro-
viding free rental or loaner ve-
hicles to customers awaiting
repairs, the company said. The
outlay will include a fund of
nearly $200 million aimed at
expanding upon the auto
maker’s current efforts to
reach and encourage custom-
ers to visit dealerships to get
air bags in Honda and Acura
vehicles replaced, Honda said.
Other big car
manufacturers also
reached air-bag
settlements this year.
Auto makers including Nis-
san Motor Co., Toyota Motor
Corp., Subaru Corp., Mazda
Motor Corp. and BMW AG
reached similar settlements
earlier this year collectively to-
taling more than $650 million.
Takata’s air bags are linked
to more than a dozen deaths
and some 180 injuries globally.
In the U.S. alone, auto makers
are in the process of recalling
an unprecedented 42 million
vehicles with as many as nearly
70 million air bags. The Japa-
nese automotive supplier, fac-
ing billions of dollars in recall
costs, filed for bankruptcy pro-
tection in the U.S. and Japan
earlier this year with a deal to
sell operations to a rival. In
January, Takata agreed to
plead guilty to criminal wire
fraud and to pay $1 billion in
penalties, including restitution
to auto makers and consumers.
The settlement’s terms in-
clude reimbursement for cer-
tain expenses customers incur
from the recalls and a possible
residual payment of up to
$500, plaintiffs’ lawyers said.
They will receive rental cars
while awaiting recall remedies
and a support program for re-
pairs and adjustments on re-
placement air-bag inflaters, in-
cluding an extended warranty,
plaintiffs’ lawyers said,
Delivery Firms Bulk Up Staffs to Cope With Holiday Orders
BY JENNIFER SMITH
Package-delivery firms are
shoring up their staffing in big
numbers as they prepare for a
holiday season likely to see
another surge in online sales.
Courier and messenger
companies added 3,900 jobs
in August, the fifth straight
monthly increase, the U.S.
Bureau of Labor Statistics
said in its monthly jobs re-
port released Friday. The par-
cel sector, which is bulking
up as demand to deliver
goods to consumers’ homes
Car SalesWheeze After Long Climb
August proves to be a
mixed month for auto
makers; GM, Toyota
post strong growth
BY MIKE COLIAS
AND CHRISTINA ROGERS
U.S. auto industry sales con-
tinued to slump in August amid
mounting signs that American
car buyers have become more
fickle following a seven-year
growth streak
While General Motors Co.
and Toyota Motor Corp.
notched relatively strong gains,
fueled in part by heavier dis-
counting, others reported
lower results, with some citing
lost sales tied to Hurricane
Harvey.
U.S. light-vehicle sales in
August fell 1.9% from a year
earlier, according to Autodata
Corp. The industry’s annual-
ized selling pace, a measure of
how sales are tracking for the
full year, was 16.14 million last
month, below analysts’ expec-
tations and down from 17.22
million a year ago. The weaker
performance comes despite
last month having an extra sell-
ing day.
GM’s August sales jumped
7.4% from a year earlier, total-
ing 275,326 vehicles, as the De-
troit giant deepened discounts
on many SUV models, aiming
to make room on dealer lots for
newer versions.
The nation’s largest auto
maker cleared out much of the
excess inventory that has been
worrying investors this year,
with stocks on dealership lots
falling to an 88-day supply,
from 104 days in July.
Ford Motor Co.’s sales
slipped 2.1%, to 209,029 vehi-
cles, as demand for SUVs
cooled. Still, it reported a 15%
surge in sales of pickup trucks,
its biggest profit generator.
Expecting Less, Workers in U.S. Cheer Up
BY LAUREN WEBER
Americans are happier at
work than before, but they
might just be settling for less.
For the first time since 2005,
more than half of U.S. workers
say they’re satisfied with their
jobs, according to the Confer-
ence Board, a research group.
Employment is up, wages are fi-
nally rising and layoffs are near
record lows, resulting in a more
optimistic, contented workforce.
That buoyancy is giving
Americans confidence to pull
out their wallets. Consumer
spending has risen every
month this year, with a strong
pickup in August, and the U.S.
economy grew in the second
quarter at its fastest pace in
more than two years.
Yet the data also suggest U.S.
workers have changing views of
what makes a job good, and a
decade of bruising job cuts, min-
imal raises and lean staffing has
led them to lower their expecta-
tions, economists and labor-
market experts say.
The average employee today
shoulders more risk for her re-
tirement and health care than in
past generations, and enjoys less
job security. The traditional
bond between employer and em-
ployee—in which companies
provided job and retirement se-
curity in exchange for hard work
and loyalty—has eroded so
much that young workers today
“don’t even know what they’re
missing,” says Rick Wartzman, a
management expert and author
of “The End of Loyalty: The Rise
and Fall of Good Jobs in Amer-
ica,” released in May by Publi-
cAffairs.
Almost 51% of employees say
they are very satisfied or some-
what satisfied with their jobs,
according to the Conference
grows, has added 7,000 jobs
over the past two months and
more than 30,000 since Au-
gust 2016.
The warehousing and stor-
age sector added 900 jobs in
August, as fulfillment centers
that process online orders
ramped up recruiting in a
tight labor market.
The growth in transporta-
tion related to e-commerce
came as the overall pace of
hiring slowed in August, with
U.S. employers adding 156,000
jobs from the previous month,
below economists’ expecta-
BUSINESS NEWS
After setting a record in 2016, U.S. auto-industry sales have posted lower growth in each of the first eight months of this year.
Fiat Chrysler Automobiles
NV’s August sales dropped 11%,
to 172,773 vehicles, as five of
its six brands reported de-
clines. Sales for Jeep—FCA’s
highest-volume brand—fell
15%, while sales of its Ram
pickups dropped 7%.
Shares of the Detroit auto
makers rallied. GM and Ford
shares were up 2.2% and 2.9%,
respectively at Friday’s close.
FCA shares jumped 4.8% after
Standard & Poor’s revised its
outlook for the stock to positive.
Strong auto sales have
helped underpin the nation’s
economic recovery since the fi-
nancial downturn, rising seven
straight years to a record of
more than 17.5 million vehicle
sales in 2016. That streak is al-
most certain to end this year
though, after the industry
posted lower growth in each of
the first eight months. August’s
Haley O’Donnell, a part-time writer, recently received eight weeks of paid maternity leave.
Board, which surveyed about
1,600 workers across the U.S.
last November on various as-
pects of their work. Workers
gave top ranking to their col-
leagues, commutes and job
tasks, but were frustrated with
companies’ promotion policies,
bonus plans, training opportuni-
ties and performance-review
processes.
American workers remain
scarred by the Great Recession,
which reset expectations for a
generation, says Peter Cappelli,
a management professor at the
University of Pennsylvania’s
Wharton School of Business.
Unemployment reached a 25-
year high of 10% in 2009, send-
ing record numbers of Ameri-
cans into long stretches of
joblessness. Those who did re-
main in jobs were asked to do
tions.
The national jobs figures
showed strength in industrial
sectors that feed shipping de-
mand, however. Manufacturing
payrolls grew by 36,000,
boosted by gains in the auto-
motive sector, and construc-
tion employment rose by
28,000.
The factory hiring came as
the Institute for Supply Man-
agement’s monthly measure of
U.S. manufacturing activity
reached a six-year high in Au-
gust.
The gains come as retailers
seasonally adjusted annual sell-
ing pace was the slowest for
the closely watched benchmark
since October 2014.
Market watchers believe
auto sales could get a lift in
coming months as owners of
vehicles lost to the flooding in
Texas and Louisiana buy re-
placement cars. Between
500,000 and 1 million vehicles
likely were totaled during the
storm and subsequent flooding,
according to Black Book, a re-
search firm that compiles car
valuations.
August results were mixed
for Japanese brands. Toyota’s
sales rose 6.8%, to 227,625 ve-
hicles, while Nissan Motor
Co.’s sales tumbled 13%, to
108,326 vehicles. Honda Motor
Co.’s sales dipped 2.4%, to
146,015. The muted August re-
sults could lead to some espe-
cially sweet deals for car shop-
more with less.
“In the dot-com period, we
had M.B.A. students who liter-
ally were expecting to be mil-
lionaires within two or three
years,” Mr. Cappelli says, refer-
ring to the late-1990s tech bub-
ble. “After 2009, we had people
who were just glad to get any
kind of job.”
Now, with unemployment at
4.4% and wages showing signs
of lifting, workers are feeling
greater peace of mind and ful-
fillment than they have in years.
Mechanical engineer David
Hunt was let go from an engi-
neering job in 2012 and spent
the next five years unemployed
or working short-term contracts.
When Mr. Hunt, who holds
two master’s degrees, was of-
fered a job at a Boston-area
high-tech company in June, the
and manufacturers are stock-
ing up inventories, with in-
bound shipments of auto
parts, furniture and back-to-
school goods driving robust
imports at American ports.
Household spending rose in
July, and shoppers are also
spending more money online,
a trend that should pick up in
the fourth quarter. E-com-
merce accounted for 8.9% of
U.S. retail sales in the second
quarter, or $111.5 billion, ac-
cording to the U.S. Census Bu-
reau, but the online sales are
growing far faster than in-
Monday, September 4, 2017 | B3
DANIEL ACKER/BLOOMBERG NEWS
pers visiting dealership lots for over SUVs to make way for the
Labor Day promotions this launch of several redesigned
week, typically one of the busi- models. GM’s SUV sales jumped
est selling periods for the car 47% compared with a year ear-
business. lier, while Ford’s fell 11%.
Auto makers have been sit- Crossover SUVs, which ride
ting on bloated inventories for on car platforms and return
months and are scrambling to better fuel economy than
purge their lots of current-year truck-based SUVs, have become
models to make way for fresher a key battleground as car buy-
versions. The car companies ers migrate away from sedans.
are behind on the annual model Auto makers “have gotten
changeover this year—an un- much more aggressive from an
usually high 91% of vehicles incentives and marketing
sold in the first half of August standpoint” in SUVs, Nissan
were from model-year 2017, ac- U.S. sale chief Judy Wheeler
cording to research firm J.D. said in an interview.
Power. Toyota outsold Ford in Au-
The lag could pressure auto gust for the second straight
makers’ profitability because month—a rarity—amid a sharp
later-model vehicles generally increase in SUV sales. Mark La-
entail lower discounts and thus Neve, Ford’s U.S. sales chief,
carry higher profit margins. said the car maker has new
GM’s incentive spending rose models coming, including a
sharply in August as the com- new full-size Expedition SUV
pany cleared out older cross- and EcoSport small crossover.
growing at a slow pace by his-
torical standards—rising 2.5%
from July 2016 to July 2017—but
low inflation means paychecks
are buying more and workers
are feeling more flush.
Amid a continuing shift away
from pensions toward 401(k)
plans with unpredictable re-
turns, satisfaction with retire-
ment plans rose from 35% in
2011 to 37.3% in 2016, the Con-
ference Board says, possibly re-
flecting higher 401(k) returns
LAUREN JUSTICE FOR THE WALL STREET JOURNAL
from stock investments.
Overall, Americans’ sense of
retirement security has dropped.
In 1993, 73% of U.S. workers felt
confident they could afford a
comfortable retirement, accord-
ing to the Employee Benefits Re-
search Institute. In 2017, 60%
felt that way.
Also falling in workers’ es-
teem are health-insurance and
family-leave plans. Employees
are paying more for health care
and coping with higher deduct-
ibles. And though some employ-
firm’s human-resources man- ers have enriched parental-leave
ager called him with “good” benefits for white-collar work-
news and “bad” news about his ers, U.S. parents get less leave
salary. Mr. Hunt, 52 years old, than their counterparts in other
asked for the bad first. industrialized nations.
We can’t pay what you asked Haley O’Donnell, 33, was a
for, the manager told Mr. Hunt. manager in the corporate office
Instead, the company offered of a Fortune 500 retailer a few
10% above that number. years ago when one of her em-
Mr. Hunt now earns enough ployees became a father. The
to support his family while his company offered no paid pater-
wife pursues a Ph.D., and says he nity leave, and Ms. O’Donnell
feels his ideas are valued. sent an angry letter to the chief
Worker satisfaction is mixed executive. She never received a
but improving in areas like response. Following a career
wages and job security. Just switch, Ms. O’Donnell wrote a
over 52% of workers feel safe young-adult novel and now
from a layoff, up 6 percentage works part time as a writer for
points from 2011, and 41.6% say Armstrong & Associates, Inc., a
they are pleased with their logistics consulting firm in Mil-
wages, up from 36.1% five years waukee. She recently had her
earlier, according to Conference first child and has eight weeks’
Board. paid maternity leave, a rare ben-
Average hourly earnings are efit for part-timers.
store sales. gust jobs data weren’t affected
Forty-six percent of par- by Hurricane Harvey, which
ents planned to shop online closed the Port of Houston and
for back-to-school supplies, disrupted supply chains
according to the National around the region. The storm
Retail Federation. And 82% has boosted some prices on
of respondents to an August the spot market for cargo
survey on the coming holiday moved by truck, where ship-
season said they expect to pers book freight transporta-
buy gifts online, while 77% tion on a daily basis.
expect to buy gifts in physi- Trucking companies are re-
cal stores, research firm porting difficulty recruiting
Fung Global Retail & Tech- drivers, with some employees
nology said. leaving for construction or en-
Despite growing demand, ergy jobs. A handful of large
trucking companies cut 1,600 publicly traded carriers have
jobs in August. BLS said Au- increased driver wages.
For personal non-commercial use only. Do not edit or alter. Reproductions not permitted.
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B4 | Monday, September 4, 2017 THE WALL STREET JOURNAL.

TECHNOLOGY WSJ.com/Tech

Alexa and Siri Escalate Battle Huawei

Amazon, Apple and
Arms Itself
rivals race to make
their virtual assistants
For Battle
more powerful On Phones
BY LAURA STEVENS BY DAN STRUMPF
AND TRIPP MICKLE
Chinese telecom giant Hua-
Apple Inc. and Ama- wei Technologies Co.
zon.com Inc. are bolstering launched a new chipset with
the teams that run their Siri built-in artificial-intelligence
and Alexa virtual assistants, capabilities to power its next-
part of a string of recent generation smartphones and
moves by technology giants to take on rivals Apple Inc. and
step up competition in an area Samsung Electronics Co.
seen by many as the future of Though Huawei is well
computing. known in the smartphone busi-
Amazon is adding hundreds ness—it is No. 3 world-wide
of engineers to the Alexa pro- behind Apple and Samsung—it
gram and giving it hiring pref- is lesser known as a maker of
erence over other divisions, ac- chips for its own phones. The
cording to people familiar with company says its new Kirin
the company’s thinking. It also 970 chip will power its forth-
has put Tom Taylor, a veteran coming Mate 10 smartphone,
Amazon executive known for set to launch next month to
building up high-growth divi- compete against the coming
sions, in charge after the for- 10th-anniversary iPhone.
mer Alexa chief retired. Huawei’s new chipset was
Apple, meanwhile, has unveiled Saturday at the IFA
DAVID PARRY/REX SHUTTERSTOCK/ZUMA PRESS

shifted oversight of its Siri electronics trade show in Ber-

system to Craig Federighi, its lin. It comes as the company
top software engineer, after has been pouring resources
five years under the leadership into the more profitable high-
of another senior vice presi- end phone market, long domi-
dent, Eddy Cue. That move nated by Apple. Its current
comes amid concerns that Siri, flagship phone, the P10,
which popularized voice assis- launched this year with a base
tants when Apple introduced it price of $685.
in 2011, has lost ground to ri- The Shenzhen-based com-
vals including Alexa and Al- pany has said the Mate 10 will
phabet Inc.’s Google Assistant. have improved camera and
Voice-driven virtual assis- Amazon introduced the Alexa-powered Echo about three years ago. It currently dominates the smart speaker market in the U.S. battery life. It also said the
tants like Siri and Alexa, pow- new Kirin chipset will power
ered by artificial-intelligence to unveil a rival device, the Amazon also has been ag- could, for example, use Alexa Google’s smart speaker, stronger image-recognition
technology, are rapidly gaining HomePod, that goes on sale at gressively signing deals with to access Microsoft’s Cortana which responds to “OK, abilities and other camera fea-
popularity by making it sim- the end of this year. other companies to add Alexa and check their calendars in Google,” now understands tures on its phones.
pler for people to perform The companies bring differ- to products ranging from Ford Outlook. questions as well as Alexa, at While Huawei’s rivals are
computing tasks from search- ent strengths to the fight. Be- Motor Co. cars to Sears Hold- Apple, in addition to rolling about 95%, according to Loup likely working on chip up-
ing for information to shop- cause of their dominance of ings Corp.’s Kenmore refriger- out a smart speaker, increas- Ventures research, which grades as well, “making AI
ping to turning on home the smartphone market, Apple, ators. Samsung has outlined a ingly is enmeshing Siri in its tested 800 questions on both computation faster and more
lamps. More than 4 billion Google and Samsung have similar vision for its recently Mac and iPhone operating sys- systems. Google previously efficient will give Huawei an
consumer devices by the end broad reach and enormous launched assistant, called tems, which Mr. Federighi also lagged behind in a February edge, if it can demonstrate im-
of 2017 will make use of some volumes of user data that they Bixby. manages. His new role was test, understanding about proved performance or battery
kind of digital assistant, ac- can use to train their assis- Google said last week that it noted on Friday in a change to 77% of queries, versus 94% life when conducting everyday
cording to IHS Markit, a mar- tants. Google, like Amazon, would open its assistant to his biography on Apple’s web- for Alexa. Google answered tasks,” said Tim Coulling, ana-
ket research firm. also draws data from its own other speaker makers including site. An Apple spokeswoman 65% of the questions cor- lyst at electronics-research
Apple, Amazon, Google, Mi- home speaker, which uses the Sony Corp., and to appliance confirmed the change but de- rectly, compared with 54% for firm Canalys.
crosoft Corp. and Samsung Google virtual assistant. Mi- makers like LG Electronics clined to comment further. Alexa, although both im- Huawei has been steadily
Electronics Co. are racing to crosoft’s Cortana is mainly Inc., to incorporate the assis- Gene Munster, head of re- proved. gaining market share from ri-
make their assistants more available on computers run- tant into dryers and vacuums. search with Loup Ventures, Amazon has been accelerat- vals in the smartphone wars.
powerful and pervasive, in ning Windows 10. Google also is taking aim at said that Mr. Federighi brings ing the growth of its Alexa In China, where Apple has
part by trying to embed them Amazon draws its user data Amazon’s e-commerce strong- more of a technical back- staff rapidly for years, and been losing ground, Huawei
in more devices. Apple still has primarily from its retail web- hold with a partnership an- ground than Mr. Cue, who currently has nearly 1,500 recaptured the top spot from
the greatest reach among site, which gives it an edge for nounced last month with Wal- heads internet software and openings mentioning Alexa on Chinese brand Oppo in the
voice assistants, with Siri ac- shopping and related tasks. It Mart Stores Inc. to let users services and is leading Apple’s its job site. first quarter, according to
cessed monthly on more than also currently dominates in of its Google Express shopping push into original video in Amazon’s Mr. Taylor took Canalys. Globally, it had 10% of
375 million Apple devices smart speakers—its Echo has service order from the retail Hollywood. charge in June and previously the market in the first quarter,
across 36 countries. Amazon’s about three-quarters of the giant by voice via Google’s vir- The ability to train assis- ran seller services, which has according to Canalys, behind
introduction of the Alexa-pow- U.S. market for such devices, tual assistant. Amazon an- tants effectively is critical to grown significantly over the Samsung’s 23% and Apple’s
ered Echo speaker nearly three with more than 11 million sold nounced a deal last week with making them more accurate past few years. 15%. While it is a major player
years ago sparked a new land through the end of last year, Microsoft to link their virtual and effective in responding to Amazon declined to com- in Europe, its sales remain low
rush, prompting Apple in June according to analyst estimates. assistants so that people queries. ment on its Alexa strategy. in the U.S.

BUSINESS WATCH
J&F INVESTIMENTOS
Tesla Faces Complaint on Labor Practices
BY TIM HIGGINS plaints “only to generate head- production associate, said in a
JBS Owner Sells lines.” Earlier this year, three statement. “I’m proud of my
Paper-Pulp Maker The National Labor Rela- workers and the union filed co-workers who filed these
tions Board filed a complaint their claims with the NLRB charges and stood up for us.”
The holding company of trou- Thursday against Tesla Inc. against Tesla. In an August statement,
bled Brazil meatpacker JBS SA based on allegations of unfair The NLRB complaint and Tesla blasted the UAW. “Faced
said Saturday it sold its paper- labor practices from workers at brewing labor unrest at the with declining membership, an
pulp maker Eldorado Brasil Celu- the company’s Fremont, Calif., Fremont factory threaten to overwhelming loss at a Nissan
lose SA to Netherlands-based factory. disrupt Tesla just as it begins plant earlier this month, cor-
Paper Excellence for 15 billion The employees accuse Tesla boosting production of the ruption charges that were re-
JEFF CHIU/ASSOCIATED PRESS

reais ($4.8 billion). The transac- of being required to sign overly Model 3, a $35,000 all-electric cently leveled against union
tion is expected to take up to 12 broad nondisclosure agree- sedan aimed at attracting more leaders who misused UAW
months to be completed, the ments that prohibit them from customers than its luxury cars funds, and failure to gain trac-
companies said Saturday. raising safety concerns. They and sport-utility vehicles that tion with our employees, it’s no
Eldorado was one of the key also allege the Silicon Valley typically sell for about surprise the union is feeling
assets owned by J&F Investi- electric-car maker harassed $100,000. Tesla Chief Executive pressured to continue its pub-
mentos, the holding company them during unionizing ef- Elon Musk cautioned in July licity campaign against Tesla,”
that belongs to the family of forts. that the effort to bring out the Fremont, Calif., workers allege harassment during unionizing efforts. the company said.
brothers Wesley and Joesley Ba- A hearing before an admin- car would be “manufacturing The UAW has faced several
tista, who have admitted to istrative judge is scheduled hell” as the company learns to their rights.” The complaint “I knew the company setbacks in recent months, in-
bribing government officials for for Nov. 14. build the vehicle in large num- listed several instances that al- couldn’t legally prevent us from cluding failing to win enough
several years in exchange for fa- Tesla said the accusations in bers. leged company employees in- speaking out about issues at votes to organize a Nissan Mo-
vors. Through their family hold- the complaint are without In Thursday’s complaint, the structed workers to stop dis- the plant, but the confidential- tor Co. factory in Mississippi
ing company, J&F, the brothers merit and accused the United NLRB’s arm in Oakland, Calif., tributing union leaflets and ity policy confused a lot of my and watching former members
have agreed to pay a fine of Auto Workers union—which said Tesla “has been interfering told them not to discuss safety co-workers and made them fear of its leadership be accused of
10.3 billion reais to sign a leni- has sought to organize employ- with, restraining and coercing concerns with the union and that they didn’t have certain misuse of worker-training
ency agreement with Brazilian ees in Fremont—of filing com- employees in the exercise of co-workers. rights,” David Gonzalez, a Tesla funds.
prosecutors. J&F recently agreed
to sell flip-flop maker Alparga-
tas SA, as well as dairy com-
pany Vigor Alimentos SA.
—Luciana Magalhaes DATA droelectric Plant, with a 400
ft.-high dam on the Yenisei that
opened 45 years ago, only five
of 12 generators were running
by two electricity lines from
the plant.
Local needs are helping
drive demand for data storage,
NEW YORK TIMES Continued from page B1 on a recent day. Mr. Sgrebny said. New counter-
Russia’s electricity. Its power “There aren’t so many buy- terrorism laws scheduled to
Publisher Seeks Out assets include four huge, So- ers, and it’s so cheap,” said come into force next year will
New Funding Source viet-era hydroelectric plants Mikhail Kamenev, deputy head oblige telecom companies to
along the Angara River, which of production at the plant. He store internet traffic and phone
The New York Times is ex- passes through Irkutsk, and the conversations for six months—
ploring another source of fund- Yenisei River, which cuts a potential source of business,
ing: philanthropy. The newspaper through central Russia and the company said. Big local
said one of its top editors, Janet empties into the Arctic Ocean.
En+ says the businesses are already clients,
Elder, will be setting up an oper- But the power plants can infrastructure is in said Mr. Sgrebny.
EVGENIA ARBUGAEVA FOR THE WALL STREET JOURNAL

ation to seek nonprofit funding produce about twice as much Mr. Sokov, the CEO, said his
that can help support ambitious as is used, leaving plenty of
place for ‘Clouds data centers could be more
newsroom projects. cheap electricity available that of Siberia.’ profitable than the aluminum
The Times has enjoyed a the company wants to mone- business. While power genera-
surge in digital subscriptions and tize. tion accounts for 30% of the
solid digital ad growth recently, The plants were built, start- cost of making aluminum, for
but the company said nonprofit ing in the 1950s, as part of ef- said electricity costs around 15 data centers the share is 50%,
funding can provide greater flex- forts to transform Siberia into kopecks per kilowatt-hour, or and close to 70% for block-
ibility. Publications like the Times an economic powerhouse. Alu- around a quarter of a cent. chain, a digital ledger to effi-
have often done stand-alone minum titan Rusal, which En+ The data center in Irkutsk, ciently share and track infor-
projects with nonprofits or phil- controls, uses the electricity to at En+’s Thermal Power Sta- mation related to contracts and
anthropic organizations, but the power its smelters. tion, is housed in a structure transactions, he said.
new arrangement formalizes the After the collapse of the So- around the size of two shipping “We’re creating our own de-
process and signals a bigger viet Union, demand for electric- containers. Inside, eight racks mand” for power, said Mr.
commitment. Aleksandr Sgrebny, who heads En+’s data-center effort, inside ity fell as Russia’s economy of servers produced by Huawei Sokov. “We are taking advan-
—Imani Moise the Irkutsk center. Big local businesses are already clients. shrank. At the Krasnoyarsk Hy- Technologies Co. are powered tage of Soviet synergies.”
For personal non-commercial use only. Do not edit or alter. Reproductions not permitted.
To reprint or license content, please contact our reprints and licensing department at +1 800-843-0008 or www.djreprints.com
THE WALL STREET JOURNAL. Monday, September 4, 2017 | B5

FINANCE & MARKETS

Storm Victims Check Fine Print SoFi Is

Probing
Most home-insurance
policies in U.S. exclude
flooding; shortfalls in
Conduct
coverage expected Claims
BY LESLIE SCISM BY PETER RUDEGEAIR
AND NICOLE FRIEDMAN
Online lender Social Fi-
Hundreds of thousands of nance Inc. said that it has
Texas homeowners are ex- launched an outside investiga-
pected to lack adequate insur- tion into claims that current
ance for repairing flooded and former female employees
houses, if they have it at all. were sexually harassed at
Many homeowners never work, the latest Silicon Valley
examine details of the policies startup to face accusations
they buy, and it is only after a about its behavior toward
flood they learn the basics: women.
Standard homeowners’ poli- The San Francisco-based
cies provide payouts for dam- company, one of the most
age from wind, fire, fallen highly valued financial-tech-
trees and other storm-related nology firms in the U.S., an-
events but not flooding. For nounced the move Friday, a
that, people generally need to day after a former employee
buy separate policies from the said in a court filing related to
CHRISTINA WAGGONER

U.S. government. his wrongful-termination law-

As Houston residents suit that the company’s CEO
started to return home Fri- allowed “male employees to
day following Hurricane Har- engage in inappropriate sexual
vey, many were for the first conduct in the workplace.”
time checking the fine print on SoFi has denied the specific
their insurance contracts and Sydney Truss hauled belongings out of his home, which flooded as Harvey dumped more than 50 inches of rain in parts of Texas. allegations of that former
hoping for the best. worker, Brandon Charles.
Among them was Andrea businesses in Harris County, flood coverage are Sydney ing any longer.” by payments to business poli- However, Chief Executive Mike
Womack, a 38-year-old mother which includes Houston, held Truss and his wife, who live Standard homeowners’ poli- cyholders and range from $10 Cagney said in a note to all
of four. The carpet and some roughly 249,000 federal flood south of Houston in Friend- cies do pay for some damage billion to $20 billion. At the employees Friday that as its
clothing in her one-story policies as of June 30, accord- swood, Texas. from water—such as if it en- high end, they would likely top lawyers were weighing a re-
house in Houston’s Settegast ing to the Federal Emergency When they were house ters the house after the wind those for Sandy, which cost sponse to the lawsuit, they
neighborhood were damaged Management Agency. There hunting last year, the couple rips off the roof. But if water $19.8 billion in 2016 dollars, learned that several people are
by water. On Friday morning, are about 1.7 million housing worried about flooding. So, overflows a riverbank or according to the Insurance In-
Ms. Womack was waiting for units in the county. before they settled on a home, gushes down a street to seep formation Institute.
an insurance company repre- Those homeowners who do they looked up whether it into a house, the homeowner An area of dispute after hur-

ANDREW GOMBERT/EPA/SHUTTERSTOCK
sentative to come by and go have flood insurance are likely flooded during Tropical Storm can expect a claim to be re- ricanes has been how much an
through what was covered. those whose mortgage lenders Allison in 2001. jected, according to industry insurer ought to pay in in-
“I signed up for insurance require it, said Etti Baranoff, “That’s kind of the storm lawyers. stances in which both winds
awhile back, but on my papers an associate professor of in- Houstonians judge everything The federal flood insurance and flooding damaged a prop-
it says it does not cover flood surance at Virginia Common- by,” said Mr. Truss. “It did not program’s payouts for Harvey erty. Those disputes could arise
insurance. So I’m not sure” wealth University. flood during Allison.” Even so, appear on track to rival those in communities where Harvey
what will be covered, she said. “The mortgage company the couple’s bank required made for superstorm Sandy in landed as a Category 4 hurri-
Early loss estimates are checks if your home is in a them to get a flood policy. 2012, the U.S.’s third-costliest cane with its strongest winds.
starting to show that Ms. flood zone or not, and they’ll “We’re hearing you have to hurricane (behind Katrina in “If there is a breath of wind
Womack isn’t alone. make you take” a policy out if have [all the damaged items] 2005 and Andrew in 1992). So and breath of storm surge,
Analytics firm CoreLogic so, she said. to get insurance” claims paid, far, 130,622 Sandy claims have that ought to be enough to put A court filing accuses CEO
has estimated total residential Even so, those with the Mr. Truss said, surveying the cost the program $8.4 billion, in front of the Texas courts Mike Cagney of allowing ‘male
flood costs of $25 billion to government flood policies piles of clothes, toys and an average of $64,331 apiece, and ask for relief for these employees to engage in
$37 billion in 70 counties in aren’t always made whole, she books in his front yard. He according to the Insurance In- people,” said David Wood, a inappropriate sexual conduct.’
Texas and Louisiana hit by said. These policies pay out a said he was initially going to formation Institute trade policyholder lawyer for corpo-
Harvey. Of that, about 70%, or maximum $250,000 for re- wait until he heard from insur- group. rate clients at Barnes & Thorn- prepared to formally allege
$18 billion to $27 billion, is building and $100,000 for per- ance officials before clearing Overall, private-market in- burg LLP in Los Angeles. they had witnessed or had
uninsured. sonal possessions. out the house, but “it would surance payouts for Harvey —Erin Ailworth been the victims of “improper
Overall, households and Among homeowners with be a disaster if we kept wait- are expected to be dominated contributed to this article. activity” at SoFi’s operations
center in Healdsburg, Calif.
“That kind of behavior has

SEC Ends Roku IPO Filing Has 2 Stock Classes

no place at SoFi, and we’re not
going to tolerate it,” Mr. Cag-
ney wrote. He said SoFi’s out-

Lawsuit BY MARIA ARMENTAL

AND MAUREEN FARRELL
of sales than in the year-ear-
lier period, when they ac-
side lawyers are reviewing the
matter and that the company
would bulk up its training and

Against Roku Inc., which makes

streaming-media devices and
counted for 73% of overall rev-
enue.
The company said in the fil-
add ways for employees to
give anonymous feedback on
any issue.

Financier software, has filed preliminary

documents for an initial public
offering of shares.
ing that it intends to grow
profit by increasing the num-
ber of active accounts and
The lawsuit and action by
SoFi occur as questions swirl
around the culture of the tech-
BY MARIA ARMENTAL The Wall Street Journal had how much it makes from each nology industry that have
previously reported the IPO user. sparked debate about a lack of
Wall Street’s top cop has plans, saying the California As of June 30, Roku said, it diversity and the treatment of
dropped a civil lawsuit against company targeted a valuation had 15.1 million monthly active women in typically male-domi-
a financier accused of manipu- of roughly $1 billion. accounts, up from 10.6 million nated companies. In February,
lating the shares of companies Roku is on track to go pub- in the year-ago period, accord- a former engineer at Uber
he helped take public, after a lic this fall. The potential IPO ing to the filing. Technologies Inc. said the
PATRICK SISON/ASSOCIATED PRESS

judge had tossed out key evi- comes during a year that has
dence in a related criminal seen a sharp uptick in public
case. offerings. Roughly $31.6 billion
The Securities and Ex- has been raised through 112
change Commission’s move IPOs on U.S. exchanges so far
Friday to drop the lawsuit— this year—more than double
which follows the Justice De- the volume last year, when
partment’s dismissal last $12.9 billion was raised in 63
month of criminal charges— U.S. IPOs through the end of
brings to an abrupt end the August, according to Dealogic.
case against Benjamin Wey, a The documents, filed Friday
key figure in the so-called re- with the Securities and Ex-
change Commission, don’t of-
fer much detail on Roku’s
planned IPO, beyond saying
Mr. Wey was a key that the company seeks to
figure in a boom in trade on Nasdaq under the
ticker ROKU.
deals that brought The securities filing in-
Chinese firms to U.S. cludes a figure of $100 million
for its issuance, but that figure
is used to calculate filing fees
and is often changed.
verse-merger boom that According to the filing,
brought many Chinese compa- owners of Class B shares—in-
nies into the U.S. more than a
decade ago.
“Today’s dismissal can only
be described as a complete
victory for our clients,” said
David Siegal, a lawyer for Mr.
Investing Chief Leaves Hedge-Fund Firm
Wey and his wife, Michaela The chief investment officer
Wey. at Winton Group Ltd., one of
“My client has always main- the world’s largest hedge
tained his innocence,” Mr. Sie- funds, quit to set up his own
gal said, adding that the one- firm.
time chief executive of New Matthew Beddall worked at
York Global Group, a now Winton for about 17 years and
shuttered private-equity in- is one of the best-known man-
vestment and corporate-advi- agers of computer-driven
sory firm, “plans to rebuild his hedge funds in Europe. He left
business and his reputation.” Winton in August, according
Mr. Wey was arrested in the to regulatory filings.
summer of 2015 and New York
Global Group shut its offices
He has set up Havelock
London, a consultancy and in-
late that year. vestment-management busi-
At the time, federal officials ness in which Winton plans to
hailed the case as a high-pro- take a stake.
file example in the govern- Mr. Beddall, 37 years old,
ment’s attempt to crack down who has been on sabbatical in
on accounting fraud and other the U.S. for the past year, said
improprieties involving small in an interview Friday that his
Chinese companies that went new firm will aim to use tech-
public in the U.S. nology to manage money and
A spokesman for the SEC give advice to clients.
declined to comment. Winton, set up by billion-
A Roku streaming device. The firm aims to go public this fall.
cluding 51-year-old founder
and Chief Executive Anthony
Wood—would retain control
based on voting power.
Class A shares, which would
be sold to the public, would
have one vote each, while
Class B shares would have 10
votes.
Roku, which had worked on
a possible IPO in 2014, was
founded in 2002 and made its
name through small boxes that
hook up to televisions and
aire hedge-fund manager Da-
vid Harding, runs around $30
billion in computer-driven
hedge-fund strategies, much of
which is based on trying to
profit from trends in financial
markets.
Mr. Beddall’s departure
comes as the hedge-fund indus-
try is in flux. Many investors,
tired of lackluster returns and
some managers’ inability to
turn a profit, are increasingly
looking to computer-driven
funds to navigate markets.
Mr. Beddall, who is still a
shareholder in Winton, is set-
ting up Havelock with former
Winton research director Kate
Land, former Winton technol-
ogy director Alisdair Wren,
and Neil Carter, a former se-
nior distribution head at Jupi-
ter Asset Management.
Winton said that since Mr.
Roku, which has yet to
make a profit, disclosed that
its loss for the first half of the
year had narrowed to $24.2
million, while revenue rose
23% to $199.7 million.
As of June 30, the company
had accumulated $244 million
in losses.
The company, which listed
among risk factors the poten-
stream video from services tial loss of Mr. Wood, said last
such as Hulu and Netflix Inc. month it had raised his base
The company, however, has salary to $1 million, from
been shifting its business to $750,000.
draw more of its revenue from Roku’s executive officers,
ads and revenue-sharing deals. including Mr. Wood, are at-
Roku still makes the major- will employees.
ity of its revenue from sales of Current investors include
streaming players: $117 million 21st Century Fox Inc., which
of the $199.7 million in reve- shares common ownership
nue it reported for the first with Wall Street Journal
half of 2017. owner News Corp.
Yet streaming players ac- —Maureen Farrell
counted for a smaller portion contributed to this article.
Beddall began his sabbatical, vesting based on securities’ val-
his role has been divided up uations, and that much of his
among other Winton staff. own wealth is run in that man-
Mr. Beddall said his new ner. Machine learning—one of
firm wouldn’t compete with the hottest areas of computer-
Winton or focus on trying to driven investing—was useful in
follow market trends—one of “specific circumstances,” Mr.
the biggest areas of quantita- Beddall said, but it was “not
tive trading. He said one of his prudent to leave a computer to
main areas of interest was in- it in an unspecified way.”
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company hadn’t disciplined a
manager who mistreated fe-
male employees.
That kicked off an investi-
gation into Uber’s operations
and culture that ultimately led
to the resignation of its chief
executive and founder, Travis
Kalanick.
At SoFi, the August lawsuit
filed against the company by
Mr. Charles said he was
wrongfully terminated for re-
porting that some managers
had hidden errors made in
processing loan applications.
The legal action also claimed
another manager had made
sexual or inappropriate com-
ments about women who
worked at SoFi.
Mr. Charles’s attorney
couldn’t be reached to com-
ment.
Mr. Charles amended his
lawsuit on Thursday to include
accusations that Mr. Cagney
defamed him in a company-
wide videoconference days af-
ter his original complaint was
filed. According to the
amended suit, Mr. Cagney told
SoFi’s staff Mr. Charles was a
liar and that SoFi would take
“unspecified action” against
him at a later date.
A SoFi spokesman said that
the company had investigated
Mr. Charles’s claims internally
and found them to have no
merit.
NAV —%RETURN—
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OT OT MUS 08/25 USD 308853.70 2.2 -2.3 6.7
For personal non-commercial use only. Do not edit or alter. Reproductions not permitted.
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B6 | Monday, September 4, 2017 THE WALL STREET JOURNAL.

MARKETS DIGEST Data as of Friday, September 1, 2017

Nikkei 225 Index STOXX 600 Index S&P 500 Index Data as of 4 p.m. New York time
Last Year ago
19691.47 s 45.23, or 0.23% Year-to-date s 3.02% 376.14 s 2.26, or 0.60% Year-to-date s 4.07% 2476.55 s 4.90, or 0.20% Trailing P/E ratio 23.86 24.71
High, low, open and close for each 52-wk high/low 20230.41 16251.54 High, low, open and close for each 52-wk high/low 396.45 328.80 High, low, open and close for each P/E estimate * 18.85 18.57
trading day of the past three months. All-time high 38915.87 12/29/89 trading day of the past three months. All-time high 414.06 4/15/15 trading day of the past three months. Dividend yield 2.00 2.11
All-time high: 2480.91, 08/07/17

Weekly P/E data based on as-reported earnings from Birinyi Associates Inc.

20500 395 2500

65-day moving average

20000 390 2475

19500 385 2450

19000 380 2425

Session high
65-day moving average
DOWN UP
18500 375 65-day moving average 2400
t

Session open Close

Close Open
t

18000 370 2375

Session low
Bars measure the point change from session's open
17500 365 2350
May June July Aug. June July Aug. May June July Aug.

International Stock Indexes Data as of 4 p.m. New York time Global government bonds
Latest 52-Week Range YTD Latest, month-ago and year-ago yields and spreads over or under U.S. Treasurys on benchmark two-year
Region/Country Index Close NetChg % chg Low Close High % chg and 10-year government bonds around the world. Data as of 3 p.m. ET
World The Global Dow 2852.47 7.58 0.27 2390.11 • 2878.99 12.7 Country/ Spread Over Treasurys, in basis points Yield
MSCI EAFE 1938.37 7.55 0.39 1614.17 • 1955.39 15.1 Coupon Maturity, in years Yield Latest Previous Month Ago Year ago Previous Month ago Year ago
MSCI EM USD 1091.36 3.66 0.34 838.96 • 1091.36 26.6 2.750 Australia 2 1.868 51.0 56.6 47.6 68.5 1.895 1.819 1.470
2.750 10 2.669 51.2 60.5 46.4 28.6 2.723 2.720 1.854
Americas DJ Americas 597.46 1.87 0.31 503.67 • 597.46 10.6
3.000 Belgium 2 -194.6 -191.2 -188.3 -138.7 -0.583 -0.540 -0.601
-0.588
Brazil Sao Paulo Bovespa 71923.11 1088.06 1.54 56820.77 • 71923.11 19.4
0.800 10 0.682 -147.5 -145.2 -149.2 -139.2 0.667 0.763 0.176
Canada S&P/TSX Comp 15191.60 –20.27 –0.13 14349.10 • 15922.37 –0.6
0.000 France 2 -0.520 -187.8 -184.0 -184.1 -136.8 -0.511 -0.498 -0.583
Mexico IPC All-Share 51080.85 –129.63 –0.25 44364.17 • 51713.38 11.9
1.000 10 0.681 -147.6 -145.8 -151.2 -139.1 0.661 0.744 0.178
Chile Santiago IPSA 3930.32 15.77 0.40 3127.54 • 3932.62 21.9
0.000 Germany 2 -0.754 -211.2 -207.9 -203.5 -140.2 -0.749 -0.692 -0.617
U.S. DJIA 21987.56 39.46 0.18 17888.28 • 22118.42 11.3
0.500 10 0.383 -177.4 -175.7 -176.5 -163.7 0.362 0.490 -0.069
Nasdaq Composite 6435.33 6.67 0.10 5046.37 • 6435.33 19.5
0.050 Italy 2 -0.088 -144.6 -137.6 -137.6 -85.9 -0.046 -0.033 -0.073
S&P 500 2476.55 4.90 0.20 2085.18 • 2480.91 10.6
2.200 10 2.070 -8.7 -7.7 -24.2 -38.3 2.042 2.014 1.186
CBOE Volatility 10.13 –0.46 –4.34 9.36 • 22.51 –27.8
0.100 Japan 2 -0.165 -152.3 -149.5 -145.7 -96.9 -0.165 -0.114 -0.184
EMEA Stoxx Europe 600 376.14 2.26 0.60 328.80 • 396.45 4.1 0.100 10 0.000 -215.7 -211.3 -218.0 -162.1 0.006 0.076 -0.053
Stoxx Europe 50 3058.37 16.76 0.55 2730.05 • 3276.11 1.6 4.000 Netherlands 2 -0.703 -206.1 -203.1 -200.7 -140.4 -0.701 -0.664 -0.618
Austria ATX 3259.40 26.57 0.82 2320.70 • 3280.48 24.5 0.750 10 0.513 -164.4 -162.7 -165.3 -152.5 0.492 0.603 0.043
Belgium Bel-20 3901.42 13.87 0.36 3426.21 • 4041.03 8.2 4.750 Portugal 2 -0.052 -141.0 -135.9 -130.1 -29.0 -0.030 0.042 0.496
France CAC 40 5123.26 37.67 0.74 4332.45 • 5432.40 5.4 4.125 10 2.811 65.4 69.4 56.5 147.6 2.813 2.820 3.044
Germany DAX 12142.64 86.80 0.72 10259.13 • 12888.95 5.8 2.750 Spain 2 -0.371 -172.9 -169.1 -170.1 -92.6 -0.361 -0.358 -0.141
Greece ATG 818.66 –6.82 –0.83 551.93 • 858.08 27.2 1.450 10 1.593 -56.4 -55.8 -80.0 -50.6 1.561 1.455 1.063
Hungary BUX 37719.90 –372.36 –0.98 27476.40 • 38097.59 17.9 4.250 Sweden 2 -0.657 -201.5 -202.0 -202.2 -141.9 -0.691 -0.679 -0.633
Israel Tel Aviv 1400.94 … Closed 1363.50 • 1478.96 –4.7 1.000 10 0.620 -153.7 -153.3 -154.2 -143.7 0.586 0.713 0.132
Italy FTSE MIB 21858.56 188.54 0.87 16134.71 • 22048.30 13.6 1.750 U.K. 2 0.184 -117.4 -114.7 -107.6 -65.3 0.183 0.267 0.133
Netherlands AEX 518.18 2.14 0.41 439.07 • 536.26 7.2 4.250 10 1.059 -109.8 -108.0 -104.0 -99.5 1.039 1.215 0.573
Poland WIG 65208.48 234.72 0.36 46756.18 • 65208.48 26.0 1.250 U.S. 2 1.358 ... ... ... ... 1.330 1.343 0.786
Russia RTS Index 1100.58 4.74 0.43 960.32 • 1195.61 –4.5 2.250 10 2.157 ... ... ... ... 2.119 2.255 1.568
Spain IBEX 35 10325.50 26.00 0.25 8607.10 • 11135.40 10.4
Sweden SX All Share 559.23 4.32 0.78 496.66 • 596.72 4.6 Commodities Prices of futures contracts with the most open interest 3:30 p.m. New York time
Switzerland Swiss Market 8941.62 16.17 0.18 7593.20 • 9176.99 8.8 EXCHANGE LEGEND: CBOT: Chicago Board of Trade; CME: Chicago Mercantile Exchange; ICE-US: ICE Futures U.S.; MDEX: Bursa Malaysia
South Africa Johannesburg All Share 56513.46 –8.65 –0.02 48935.90 • 56655.88 11.6 Derivatives Berhad; TCE: Tokyo Commodity Exchange; COMEX: Commodity Exchange; LME: London Metal Exchange;
NYMEX: New York Mercantile Exchange; ICE-EU: ICE Futures Europe. *Data as of 8/31/2017
Turkey BIST 100 110010.49 … Closed 72519.85 •110423.11 40.8
One-Day Change Year Year
U.K. FTSE 100 7438.50 7.88 0.11 6665.63 • 7547.63 4.1 Commodity Exchange Last price Net Percentage high low

Asia-Pacific Corn (cents/bu.) CBOT 354.00 -3.75 -1.05% 417.25 344.25

Soybeans (cents/bu.) 947.75 2.50 0.26% 1,047.00 907.00
Australia S&P/ASX 200 5724.60 10.10 0.18 5156.60 • 5956.50 1.0
Wheat (cents/bu.)
CBOT
CBOT 439.00 4.50 1.04 592.25 422.50
China Shanghai Composite 3367.12 6.31 0.19 2980.43 • 3367.12 8.5
Live cattle (cents/lb.) CME 105.525 0.125 0.12 122.850 99.125
Hong Kong Hang Seng 27953.16 –17.14 –0.06 21574.76 • 28094.61 27.1
Cocoa ($/ton) ICE-US 1,948 22 1.14 2,301 1,794
India S&P BSE Sensex 31892.23 161.74 0.51 25765.14 • 32575.17 19.8
Coffee (cents/lb.) ICE-US 129.40 0.05 0.04 166.75 119.10
Japan Nikkei Stock Avg 19691.47 45.23 0.23 16251.54 • 20230.41 3.0
Sugar (cents/lb.) ICE-US 14.07 -0.33 -2.29 20.50 12.74
Singapore Straits Times 3277.26 … Closed 2787.27 • 3354.71 13.8
Cotton (cents/lb.) ICE-US 71.71 0.78 1.10 75.72 66.15
South Korea Kospi 2357.69 –5.50 –0.23 1958.38 • 2451.53 16.3 Robusta coffee ($/ton) ICE-EU 2064.00 -5.00 -0.24 2,272.00 1,892.00
Taiwan Weighted 10594.82 9.04 0.09 8902.30 • 10594.82 14.5
Copper ($/lb.) COMEX 3.1150 0.0165 0.53 3.1355 2.5025
Source: SIX Financial Information;WSJ Market Data Group Gold ($/troy oz.) COMEX 1328.80 6.60 0.50 1,334.50 1,160.80
Silver ($/troy oz.) COMEX 17.770 0.195 1.11 18.875 14.440
Currencies London close on Sept. 1 Aluminum ($/mt)* LME 2,132.00 46.00 2.21 2,132.00 1,688.50
Tin ($/mt)* LME 20,600.00 250.00 1.23 21,225.00 18,760.00
Yen, euro vs. dollar; dollar vs. major U.S. trading partners US$vs,
Fri YTDchg Copper ($/mt)* LME 6,819.00 34.00 0.50 6,819.00 5,491.00
Country/currency in US$ per US$ (%) Lead ($/mt)* LME 2,398.00 14.00 0.59 2,481.00 2,022.00
10% Europe Zinc ($/mt)* LME 3,140.00 17.50 0.56 3,144.00 2,450.50
Bulgaria lev 0.6073 1.6466 –11.4 Nickel ($/mt)* LME 11,700.00 70.00 0.60 11,790.00 8,780.00
s WSJ Dollar index Croatia kuna 0.1602 6.242 –13.0 Rubber (Y.01/ton) TCE 218.40 -0.20 -0.09 n.a. n.a.
0
Euro zone euro 1.1880 0.8418 –11.4
s Euro Palm oil (MYR/mt) MDEX 2706.00 unch. unch. 2950.00 2380.00
Czech Rep. koruna-b 0.0456 21.938 –14.6
–10 Denmark krone 0.1597 6.2613 –11.4 Crude oil ($/bbl.) NYMEX 47.06 -0.17 -0.36 58.34 42.52
sYen
Hungary forint 0.003887 257.30 –12.6 NY Harbor ULSD ($/gal.) NYMEX 1.7347 -0.0072 -0.41 1.8138 1.3814
Iceland krona 0.009525 104.99 –7.1 RBOB gasoline ($/gal.) NYMEX 1.7272 -0.0520 -2.92 1.7832 1.2902
–20 Norway krone 0.1283 7.7958 –9.8
0.2792 3.5814 –14.5
Natural gas ($/mmBtu) NYMEX 3.075 0.035 1.15 3.5660 2.7990
2016 2017 Poland zloty
Russia ruble-d 0.01739 57.500 –6.1 Brent crude ($/bbl.) ICE-EU 52.70 -0.16 -0.30 60.08 45.19
US$vs, US$vs,
YTDchg YTDchg Sweden krona 0.1251 7.9968 –12.2 Gas oil ($/ton) ICE-EU 510.00 6.75 1.34 534.00 408.25
Fri Fri
Country/currency in US$ per US$ (%) Country/currency in US$ per US$ (%) Switzerland franc 1.0382 0.9632 –5.5
Turkey lira 0.2919 3.4255 –2.8 Sources: SIX Financial Information; WSJ Market Data Group
Americas Hong Kong dollar 0.1278 7.8243 0.9
Ukraine hryvnia 0.0388 25.7800 –4.8
Argentina peso-a 0.0580 17.2376 8.6
India rupee
Indonesia rupiah
0.0157
0.0000750
63.8450
13338
–6.1
–1.4
U.K. pound 1.2973 0.7708 –4.8 Cross rates London close on Sep 1
Brazil real 0.3192 3.1327 –3.8 Middle East/Africa
Japan yen 0.009081 110.12 –5.9
Canada dollar 0.8076 1.2383 –7.9 USD GBP CHF JPY HKD EUR CDN AUD
Kazakhstan tenge 0.002958 338.02 1.3 Bahrain dinar 2.6518 0.3771 –0.02
Chile peso 0.001602 624.40 –6.8 Australia 1.2533 1.6260 1.3016 0.0114 0.1602 1.4888 1.0123 ...
Macau pataca 0.1240 8.0627 1.8 Egypt pound-a 0.0567 17.6390 –2.7
Colombia peso 0.0003409 2933.43 –2.3 Canada 1.2383 1.6063 1.2858 0.0112 0.1583 1.4708 ... 0.9878
Malaysia ringgit-c 0.2342 4.2705 –4.8 Israel shekel 0.2798 3.5741 –7.1
Ecuador US dollar-f 1 1 unch
New Zealand dollar 0.7166 1.3955 –3.4 Kuwait dinar 3.3192 0.3013 –1.4 Euro 0.8418 1.0921 0.8741 0.0076 0.1076 ... 0.6799 0.6716
Mexico peso-a 0.0562 17.7948 –14.2
Pakistan rupee 0.0095 105.150 0.7 Oman sul rial 2.5977 0.3850 –0.003 Hong Kong 7.8243 10.1487 8.1240 0.0711 ... 9.2940 6.3188 6.2422
Peru sol 0.3088 3.2385 –3.4
Philippines peso 0.0196 51.055 2.9 Qatar rial 0.2711 3.688 1.33 Japan 110.1200 142.8600 114.3300 ... 14.0740 130.8000 88.9400 87.8600
Uruguay peso-e 0.0349 28.680 –2.3
Singapore dollar 0.7373 1.3563 –6.3 Saudi Arabia riyal 0.2666 3.7504 –0.01 0.9632 1.2494 ... 0.0087 0.1231 1.1441 0.7777 0.7683
Venezuela bolivar 0.099059 10.09 1.0 Switzerland
South Korea won 0.0008921 1121.00 –7.2 South Africa rand 0.0774 12.9247 –5.6
U.K. 0.7708 ... 0.8004 0.0070 0.0985 0.9158 0.6225 0.6150
Asia-Pacific Sri Lanka rupee 0.0065432 152.83 3.0 Close Net Chg % Chg YTD % Chg
0.7979 1.2533 –9.7 Taiwan dollar 0.03322 30.103 U.S. ... 1.2973 1.0382 0.0091 0.1278 1.1880 0.8076 0.7979
Australia dollar –7.2 WSJ Dollar Index 85.69 –0.03 –0.04 –7.79
China yuan 0.1526 6.5551 –5.6 Thailand baht 0.03015 33.170 –7.4 Sources: Tullett Prebon, WSJ Market Data Group Source: Tullett Prebon

Key Rates Top Stock Listings 4 p.m. New York time

Latest 52 wks ago % YTD% % YTD% % YTD%
Libor Cur Stock Sym Last Chg Chg Cur Stock Sym Last Chg Chg Cur Stock Sym Last Chg Chg Asia Titans 50
One month 1.23056% 0.52572% ¥ TakedaPharm 4502 6062.00 -0.25 25.38 CHF RocheHldgctf ROG 244.20 0.29 4.99 Last: 165.53 s 0.18, or 0.11% YTD s 17.4%
Three month 1.31611 0.83511 Asia Titans HK$ TencentHoldings 0700 326.20 -0.31 71.96 £ RoyDtchShell A RDSA 2122.00 -0.24 -5.37
Six month 1.45333 1.24706 HK$ AIAGroup 1299 60.50 0.75 38.29 ¥ TokioMarineHldg 8766 4390.00 ... -8.47 € SAP SAP 88.60 0.57 6.99 High 170
One year 1.71178 1.55944 82.71 1.29 7.56
¥ AstellasPharma 4503 1402.00 1.34 -13.64 ¥ ToyotaMtr 7203 6182.00 -0.02 -10.12 € Sanofi SAN Close 165
Euro Libor AU$ AustNZBk ANZ 29.59 0.65 -2.73 AU$ Wesfarmers WES 42.44 -0.42 0.71 € SchneiderElectric SU 68.56 1.23 3.71 Low 160
110.75
One month -0.40214% -0.37400% 0.87 -5.18
t
AU$ BHP BHP 27.42 0.15 9.42 AU$ WestpacBanking WBC 31.34 0.22 -3.87 € Siemens SIE
Three month -0.37329 -0.32586 HK$ BankofChina 3988 4.11 -0.24 19.48 AU$ Woolworths WOW 25.79 -0.81 7.01 € Telefonica TEF 9.06 -0.03 2.68 50–day 155
Six month -0.30757 -0.20500 HK$ CKHutchison 0001 101.70 -0.68 15.70 € Total FP 43.80 0.83 -8.28 moving average 150
One year -0.20929 -0.07543 HK$ CNOOC 0883 9.41 0.53 -2.99 Stoxx 50 CHF UBSGroup UBSG 15.80 ... -0.94
145
Euribor AU$ CSL CSL 130.99 1.92 30.46 € Unilever UNA 50.06 0.10 27.98
CHF ABB ABBN 22.41 0.95 4.33
One month -0.37300% -0.37300% ¥ Canon 7751 3833.00 -0.54 16.33 £ Unilever ULVR 4489.00 -0.66 36.34 2 9 16 23 30 7 14 21 28 4 11 18 25 11
€ ASMLHolding ASML 132.10 1.23 23.86
Three month -0.32900 -0.30100 ¥ CentralJapanRwy 9022 18710 0.43 -2.70 € Vinci DG 78.36 1.31 21.11 June July Aug.
€ AXA CS 24.50 0.49 2.13
Six month -0.27300 -0.19300 HK$ ChinaConstructnBk 0939 6.81 -0.73 14.07 £ VodafoneGroup VOD 219.50 -0.86 9.83
€ AirLiquide AI 102.95 0.39 -2.56
One year -0.16100 -0.05200 HK$ ChinaLifeInsurance 2628 24.90 -0.80 23.27 CHF ZurichInsurance ZURN 287.40 0.17 2.50
180.95
Yen Libor HK$ ChinaMobile 0941 82.90 -0.12 0.85
€
€
Allianz
AB InBev
ALV
ABI 99.89
0.67 15.25
0.37 -0.66 DJIA Stoxx 50
One month -0.05557% -0.07814% HK$ ChinaPetro&Chem 0386 6.05 1.00 10.00 £ AstraZeneca AZN 4592.50 1.13 3.49 Last: 3058.37 s 16.76, or 0.55% YTD s 1.6%
Three month -0.02921 -0.03007 AU$ CmwlthBkAust CBA 75.48 -0.42 -8.41 € BASF BAS 82.44 1.31 -6.65
$ AmericanExpress AXP 86.14 0.05 16.28
Six month -0.00707 -0.00071 ¥ EastJapanRailway 9020 10100 0.15 ... € BNP Paribas BNP 64.35 0.69 6.28
$ Apple AAPL 164.05 0.03 41.64 3275
One year 0.11086 0.09314 ¥ Fanuc 6954 21345 0.02 7.72 £ BT Group BT.A 288.45 -1.40 -21.38
$ Boeing BA 240.33 0.28 54.37
$ Caterpillar CAT 118.28 0.67 27.54 3200
Offer Bid ¥ Hitachi 6501 754.00 -0.40 19.30 € BancoBilVizAr BBVA 7.43 0.16 17.06
TW$ Hon Hai Precisn 2317 117.50 ... 39.55 $ Chevron CVX 108.76 1.06 -7.60 3125
Eurodollars € BancoSantander SAN 5.48 0.33 10.45
¥ HondaMotor 7267 3096.00 0.49 -9.34 $ CiscoSystems CSCO 32.30 0.28 6.88
One month 1.3300% 1.2300% £ Barclays BARC 192.15 0.55 -14.01 3050
KRW HyundaiMtr 005380 143000 1.78 -2.05 $ Coca-Cola KO 45.78 0.50 10.42
Three month 1.3700 1.2700 € Bayer BAYN 108.35 0.79 9.30
2975
HK$ Ind&Comml 1398 5.80 -1.02 24.73 $ Disney DIS 101.50 0.30 -2.61
Six month 1.5700 1.4700 £ BP BP. 444.75 -0.09 -12.73
$ DowDuPont DWDP 67.18 0.78 ...
One year 1.8200 1.7200 ¥ JapanTobacco 2914 3770.00 0.16 -1.93 £ BritishAmTob BATS 4815.50 -0.32 4.20 2900
¥ KDDI 2956.00 -0.37 -0.12
$ ExxonMobil XOM 76.57 0.31 -15.17
Latest 52 wks ago 9433 € Daimler DAI 61.80 0.93 -12.61 $ GeneralElec GE 25.14 2.40 -20.44 2 9 16 23 30 7 14 21 28 4 11 18 25 11
¥ Mitsubishi 8058 2527.00 -0.65 1.49 € DeutscheTelekom DTE 15.12 -0.30 -6.66 $ June July Aug.
Prime rates GoldmanSachs GS 225.88 0.96 -5.67
¥ MitsubishiElectric 6503 1679.50 3.23 3.07 £ Diageo DGE 2589.00 -0.12 22.70 $
U.S. 4.25% 3.50% HomeDepot HD 150.78 0.61 12.46
¥ MitsubishiUFJFin 8306 675.60 0.22 -6.19 € ENI ENI 13.31 1.06 -13.96 $
Canada 2.95 2.70 Intel INTC 35.09 0.06 -3.25
1635.00 -0.58 1.74 1532.50
Japan
Hong Kong
1.475
5.00
1.475
5.00
¥
¥
Mitsui
Mizuho Fin
8031
8411 189.10 ... -9.87
£
£
GlaxoSmithKline
Glencore
GSK
GLEN 367.00
-0.07 -1.89 $
2.09 32.32 $
IBM
JPMorganChase
IBM
JPM
144.08
91.70
0.73
0.89
-13.20
6.27
Dow Jones Industrial Average P/E: 20
¥ NTTDoCoMo 9437 2532.00 -0.84 -4.92 £ HSBC Hldgs HSBA 749.70 -0.11 14.13 $ J&J JNJ 131.03 -1.01 13.73 Last: 21987.56 s 39.46, or 0.18% YTD s 11.3%
Policy rates
ECB 0.00% 0.00%
AU$ NatAustBnk NAB 30.33 0.43 -1.11 € INGGroep INGA 14.93 0.20 11.67 $ McDonalds MCD 159.81 -0.10 31.29
Britain 0.25 0.25
¥ NipponTeleg 9432 5332.00 -2.49 8.55 £ ImperialBrands IMB 3231.00 0.95 -8.79 $ Merck MRK 63.83 -0.05 8.43 22000
Switzerland 0.50 0.50
¥ NissanMotor 7201 1096.00 0.27 -6.76 € IntesaSanpaolo ISP 2.84 0.21 17.15 $ Microsoft MSFT 73.94 -1.11 18.99
¥ Panasonic 6752 1462.50 -0.20 22.95 € LVMHMoetHennessy MC 221.75 0.68 22.24 $ Nike NKE 53.36 1.04 4.98
21500
Australia 1.50 1.50
HK$ PingAnInsofChina 2318 62.25 0.16 60.44 £ LloydsBankingGroup LLOY 63.69 -0.20 1.89 $ Pfizer PFE 33.96 0.12 4.56
U.S. discount 1.75 1.00 21000
Fed-funds target 1.00-1.25 0.25-0.50
$ RelianceIndsGDR RIGD 49.85 0.81 58.00 € LOreal OR 177.95 0.34 2.62 $ Procter&Gamble PG 92.53 0.28 10.05
Call money 3.00 2.25
KRW SamsungElectronics 005930 2324000 0.35 28.97 £ NationalGrid NG. 968.80 -0.61 -6.68 $ 3M MMM 203.56 -0.37 13.99 20500
¥ Seven&I Hldgs 3382 4347.00 -0.41 -2.38 CHF Nestle NESN 81.15 -0.25 11.09 $ Travelers TRV 119.90 -1.06 -2.06
Overnight repurchase rates 20000
U.S. 1.18% 0.52%
¥ SoftBankGroup 9984 8950.00 0.31 15.26 CHF Novartis NOVN 80.85 -0.06 9.11 $ UnitedTech UTX 117.92 -1.50 7.57
Euro zone n.a. n.a.
¥ Sony 6758 4376.00 0.90 33.62 DKK NovoNordiskB NOVO-B 298.40 0.13 17.16 $ UnitedHealth UNH 199.75 0.43 24.81 2 9 16 23 30 7 14 21 28 4 11 18 25 1
¥ Sumitomo Mitsui 8316 4120.00 0.15 -7.62 £ Prudential PRU 1823.00 0.41 12.01 $ Visa V 103.90 0.37 33.17 June July Aug.
Sources: WSJ Market Data Group, SIX HK$ SunHngKaiPrp 0016 129.70 -0.69 32.35 £ ReckittBenckiser RB. 7375.00 0.59 7.10 $ Verizon VZ 47.92 -0.10 -10.23 Note: Price-to-earnings ratios are for trailing 12 months
Financial Information, Tullett TW$ TaiwanSemiMfg 2330 216.50 ... 19.28 £ RioTinto RIO 3759.50 0.35 19.03 $ Wal-Mart WMT 78.37 0.38 13.38 Sources: WSJ Market Data Group; Birinyi Associates
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THE WALL STREET JOURNAL. Monday, September 4, 2017 | B7

FINANCE & MARKETS

In Germany,
‘Locals’ Top
Exporters
Strong euro, robust Local series, leaving out Ger-
many’s major export champi-
national economy lift ons.
the stocks of firms The DAX itself is dominated
by companies that make most
with domestic focus of their money abroad, with
over 75% of revenue coming
BY MIKE BIRD from outside Germany.
The outperformance of do-

KRISZTIAN BOCSI/BLOOMBERG NEWS

The German economy is fa-
mous as an export power-
house, but this year, in the
country’s stock markets, the
companies closest to home are
outperforming their interna-
tionally focused peers by a
mile.
The country’s flagship stock
index, the DAX, is up 5.8% for
2017. Meanwhile, the FTSE Lo-
cal Germany Index has re-
turned more than 20% since
the year began.
The increasing strength of
the euro and the still-improv-
ing picture for the German do-
mestic economy have both
helped drive a wedge between
the two indexes.
Only stocks that receive
70% or more of their total rev-
enue from their home coun-
tries are included in the FTSE
mestic-focused stocks began
most clearly in May, when the
trade-weighted euro—a mea-
sure of the common currency’s
value against the currencies of
the eurozone’s main trading
partners—began to pick up
sharply in the wake of France’s
presidential election.
That makes sense because A Claas factory in Harsewinkel, Germany. The country’s domestic-focused stocks are outperforming export-oriented peers.
Germany’s major exporters see
drawbacks from a stronger fell by more than 10% against an upward trajectory, the man consumers or real estate. naut” this year, up from the
euro. A dollar in revenue the eurozone’s main trading buoyant German economy is Household consumption 1.8% expected previously.
translates into fewer euros, partners’ currencies, the FTSE amplifying the differences be- rose 2.2% in the second quar- There is no guarantee that
meaning lower profits. The Local Germany’s total return tween inward- and outward-fo- ter of 2017, compared with the Germany’s home-focused
stronger euro also makes Ger- was practically identical to cused businesses. year-earlier period, the stron- stocks will keep outperform-
man products more expensive the DAX. In essence, Ger- In the past four years, the re- gest increase in over 10 years. ing, but many analysts are pro-
for consumers outside the eu- many’s strong national econ- covery in domestic demand out- HSBC Holdings PLC econo- jecting further support for
rozone, which can weigh on omy in those years helped do- stripped previous recoveries be- mists cited the rise in con- household spending, too.
demand. mestic firms match the gains ginning in 1993, 1999, 2005 and sumption for raising their Both the center-left Social
But the different perfor- reaped by exporters that were 2009, according to UBS Group growth forecasts. The bank Democrats and Chancellor An-
mances of the two indexes enjoying the benefits of a AG economist Felix Huefner. now expects a 2.2% rise in gela Merkel’s center-right
isn’t just down to the euro. In cheap local currency. The German stocks UBS analysts gross domestic product from Christian Democrats have
2014 and 2015, when the euro Now that the euro has taken favor have high exposure to Ger- “the German economic jugger- promised tax cuts.

Investors Stop Pulling Money Out of Stock Market

BY AKANE OTANI
Investors finally stepped
back into the U.S. stock market
again last week.
After pulling $30 billion out
of equity funds
EQUITIES over a 10-week
span this sum-
mer, investors
put $300 million back into the
funds for the seven days ended
Wednesday, according to Bank
of America Merrill Lynch data.
Stocks have ticked higher in
recent days as a fresh batch of
economic data showing the
U.S. consumer on strong foot-
ing helped investors look past
renewed tensions between
North Korea and the U.S.
Before the latest week, mu-
tual funds and exchange-
traded funds that invest in U.S.
equities had posted their lon-
gest streak of withdrawals in
13 years—the latest indication
to some analysts that investors
were increasingly wary of the
long U.S. stock rally.
There are plenty of reasons
not to love the stock rally at
the moment, investors say.
Stocks are trading at higher-
than-average valuations; eco-
nomic data has shown lagging
measures for inflation, wage
growth and U.S. auto sales; and
turbulence in Washington has
cast doubt on the Trump ad-
ministration’s ability to push
through policies such as tax
cuts and fiscal stimulus. While
hopes for pro-business policies
had helped U.S. stock indexes
jump past their international
peers after Election Day, lately
many investors have expressed
a preference for stocks else-
where that are trading at
lower valuations. Japanese eq-
uity funds attracted inflows for
the seventh consecutive week
in the seven days ended
Wednesday, data show.
Concerns about the durabil-
ity of the U.S. stock rally has
also kept many investors cau-
tious heading into the end of
the summer, while reigniting
demand for so-called haven as-
sets such as gold, government
bonds and their stock proxies.
The S&P 500 managed to
eke out a monthly gain, but
only just: The broad index fin-
ished August up 1.35 points, or
less than 0.1%. Meanwhile, as-
sets that investors consider
safer stores of value rallied.
Shares of utilities companies,
which many investors think of
as bondlike because of their
relatively hefty dividends, rose
2.7% in August. Gold jumped
3.9% to $1,316.20 a troy ounce,
finishing off the month at its
highest level since September.
The true test of investors’
appetite for stocks will arrive
in coming weeks. Next, with
Congress returning from re-
cess, investors will have to
contend with a number of
risks, including coming de-
bates over lifting the debt ceil-
ing and passing a spending
bill. Signs of political gridlock
could send investors fleeing
from U.S. stock funds again.

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B8 | Monday, September 4, 2017
Oil Outlook Grows Darker
Banks in survey again
cut forecast amid
doubts about OPEC
and rising U.S. output
BY MARINA FORCE
Banks have cut their fore-
casts on oil prices for a fourth
consecutive month, as markets
brace for more supply when
OPEC’s agreement to cap out-
put is expected to end next
year.
Members of the Organiza-
tion of the Petroleum Exporting
Countries renewed a deal with
other crude-oil producers in
May to withhold almost 2% of
global oil supply. The accord is
set to expire in March
and concerns are mounting
among investors as that date
approaches, although Saudi
Arabia and Russia are pushing
to extend the deal for three
more months.
A poll of 14 investment
banks, surveyed by The Wall
Street Journal at the end of
August, predicted that Brent
crude, the international
benchmark, will average $54 a
barrel next year, down $1 from
the July survey. The banks ex-
pect West Texas Intermediate,
the U.S. oil gauge, to average
$51 a barrel in 2018, down $2
from the previous survey.
On Friday, Brent crude fell
0.2%, to $52.75 a barrel, while
West Texas Intermediate rose
0.1%, to $47.29.
The survey was conducted
before Tropical Storm Harvey
crippled refineries on the U.S.
Gulf Coast. Analysts say it is
too early to predict what the
longer-term impact of the
storm will be, but it could
have some beneficial effects
on the oil price given that U.S.
production has been hit.
“We still expect prices to
fall back next year as the
OPEC deal comes to an end
and U.S. production growth
accelerates again due to
higher prices,” Tom Pugh,
commodities economist at
Email: heard@wsj.com
A Case for Selling the Swiss Franc
For all of the controversy
around aggressive monetary
policy, there is little dispute
that central bankers have suc-
ceeded in moving the values
of stocks, bonds and curren-
cies. The exception that
proves the rule is the Swiss
franc.
The Swiss National Bank
has tried hard to battle the
strength of its currency but,
where other central banks had
big impacts, the Swiss franc
has refused to fall. The SNB
has gone deep into negative-
interest-rate territory. For
four years it put an outright
cap on appreciation against
the euro, printing francs and
buying foreign assets in a
campaign that has taken its
balance sheet to more than
100% of Switzerland’s gross
domestic product.
The SNB’s cap did tempo-
rarily turn the Swiss franc
around, but chaos sparked by
its January 2015 decision to
abandon that policy still
hasn’t fully reversed. On a
trade-weighted basis and ad-
justed for inflation, the Swiss
franc is still some 12% higher
than its precrisis average.
Hewlett’s Meg Whitman Has a Different Mess to Clean Up
If Meg Whitman is looking
for a fix-up job, she doesn’t
have to go far.
The Hewlett Packard En-
terprise chief executive was
apparently interested in the
top job at Uber Technolo-
gies after all, though exactly
how much seems a matter of
some dispute. Regardless,
that job has now gone to
someone else, leaving inves-
tors to wonder just what’s in
store for Hewlett Packard.
Ms. Whitman put the one-
time tech behemoth on a
crash diet that has left it
smaller and, based on recent
sales trends, weaker. Then
she flirted with the idea of
taking charge of Silicon Val-
ley’s most pre-eminent mul-
Looking Ahead at Oil Prices
Where investment banks in August's survey see the price
of U.S. crude-oil futures in the next few quarters
$110
100
90
80
70
60
50
40
30
20
Nymex crude-oil futures, price per barrel
10
0 4Q 1Q 2Q 3Q 4Q
2014 ’15
Sources: WSJ Market Data Group (oil price); the companies (forecasts)
Capital Economics, wrote in a
report.
The OPEC production deal
is aimed at ending a global
glut that has weighed on oil
prices and shaken the econo-
mies of countries dependent
on crude.
Market fundamentals have
been going oil producers’ way
in recent months as inventory
levels fall. On Wednesday, the
U.S. Energy Information Ad-
ministration reported that U.S.
stockpiles, excluding the Stra-
tegic Petroleum Reserve, de-
clined the previous week by
5.4 million barrels.
Stockpiles held by members
of the Organization for Eco-
nomic Cooperation and Devel-
opment declined in May, ac-
cording to the latest available
data from the International
Energy Agency.
Despite this bullish data,
analysts don’t believe prices
will be heading much higher.
“While we estimate that a
very modest undersupply will
persist through the end of the
year, OECD inventories are un-
likely to return to five-year av-
HEARD ON THE STREET
Even Lower, Even Longer
Consumer prices, change from a year earlier
3%
2 Switzerland
1 first time the franc showed
0 was after the French elec-
–1
–2
2012 ’13
Note: Eurozone inflation to August 2017, Swiss to July
Source: FactSet
Against the euro, the franc
has fallen 6% this year but is
still stronger than the level
the SNB targeted before Janu-
ary 2015.
The SNB’s efforts to
weaken the franc have been
overwhelmed by its much big-
ger neighbor’s actions. But
now the European Central
Bank is gradually moving
away from quantitative easing
as its economy recovers.
Switzerland’s low inflation
means the SNB has no reason
Server Crash
Hewlett Packard operating results
for enterprise group, quarterly
$8 billion Revenue
6
4 of the business following the
2 divestitures of its services
0 Ms. Whitman needs to
FY 2015 ’16
Note: Fiscal year ends in October
Source: FactSet
ticar pileup.
So Ms. Whitman has some
explaining to do, which
hopefully will come during
the company’s fiscal third-
quarter earnings call this
MARKETS
Banks’ Forecasts
’16 ’17 ’18
erage levels anytime soon,”
said Jason Gammel, research
analyst at Jefferies.
Analysts also say that with-
out further output caps, pro-
duction from OPEC and Russia
may rise, flooding the markets
with crude and potentially
sinking prices. Even if the
agreement was renewed, ana-
lysts doubt compliance with it
would be guaranteed.
“We could see increasing
dissatisfaction within individ-
ual members, who then will
begin to overproduce on their
quotas,” said Hamza Khan,
head of commodity strategy at
ING Bank.
Indeed, many OPEC nations,
which rely on oil for a sub-
stantial part of their budgets,
are already failing short of
their reduction targets.
Rising U.S. production, and
increased supply from Libya
and Nigeria, two OPEC mem-
bers that are exempt from
production caps, has added to
the bearish sentiment about
the market, said Carsten
Fritsch, an analyst at Commer-
zbank AG.
FINANCIAL ANALYSIS & COMMENTARY
Eurozone
’14 ’15 ’16 ’17
THE WALL STREET JOURNAL.
to change. Annual inflation
has only been above zero in
12 of the 67 months since the
start of 2012. The SNB fore-
casts inflation at 0.3% in 2018
and 1% in 2019.
The combination of weak
inflation and loose monetary
policy in Switzerland and
stronger growth and less eas-
ing in Europe argues for the
franc to weaken versus the
euro. The other factor push-
ing for a weaker franc is im-
proving eurozone prospects.
week. Hewlett Packard’s
stock price has fallen 7% fol-
lowing each of its last two
quarterly reports. A slump in
the sales of servers, data-
Operating storage gear and other en-
profit
terprise tech hardware have
put pressure on what is left
and software divisions.
’17 show a way out of that
slump, which won’t be easy.
Splitting from the computer-
and-printer half nearly two
years ago established Hewl-
ett Packard Enterprise with a
little over $50 billion a year
in annual revenue. The sub-
sequent divestitures leave
the enterprise group and fi-
RBC
Standard
Chartered
HSBC
UBS
Morgan Stanley
Credit Suisse
Bank of America
Merrill Lynch
Deutsche Bank
Average
Commerzbank
Barclays
Citigroup
Société Générale
BNP Paribas
J.P. Morgan
ING Bank
THE WALL STREET JOURNAL.
On the demand side, growth
in global oil consumption has
been lackluster this year, fur-
ther hampering efforts to re-
duce the glut.
“If you add higher supply
with weaker demand growth,
you end up with a market we
believed is oversupplied and
susceptible to lower prices,”
Mr. Khan said.
The banks in the survey ex-
pect prices to stay below $60
a barrel in 2019. These ana-
lysts predict that Brent will
average $58.47 a barrel, down
from $76 a barrel in the Au-
gust 2016 survey.
Analysts still see the U.S.
shale industry as being key to
the longer-term outlook for oil
prices. Some predict that the
country will produce just shy
of 10 million barrels a day
next year, from around 9.3
million now. That would be
this industry’s highest-ever
annual average.
“We see continuing records
being broken for U.S. produc-
tion…. That limits the power
and ability of OPEC to control
oil prices,” Mr. Fritsch said.
Fear of the currency bloc
breaking up helps the franc.
Swiss outward investment
flows, much of which tradi-
tionally landed in the euro-
zone, have collapsed since
the crisis. As those fears
fade, so should the franc. The
signs of weakening this year
tions, won by staunchly pro-
Europe Emmanuel Macron.
The franc won’t stop being
a haven. When risk aversion
rises, investors seem hard-
wired to embrace it. Italian
elections next year could be a
flashpoint. But unless there is
a specific threat to eurozone
cohesion, such reversals
shouldn’t prove too disrup-
tive.
All that makes the Swiss
franc a sell against the euro.
Even if the franc falls from
its current €0.875 to €0.83, a
big move in currencies, it
would only be at the highest
level that the Swiss central
bank allowed it to go in
2015. A further decline
would make them happier.
Investors should go along for
the ride. —Richard Barley
nancial services units re-
maining, which are projected
to generate about $29 billion
in combined revenue for the
fiscal year ending in October,
according to FactSet. That is
down 6% last year.
A big problem is servers,
which will account for more
than 40% of Hewlett Pack-
ard’s revenue. Server sales
for the six-month period
ended April 30 slid more
than 13% from the same pe-
riod last year. Rival Dell has
been pricing its own servers
aggressively and has gained
share. And Microsoft—Hewl-
ett’s largest customer—has
been cutting back on server
orders.
Hewlett Packard needs to
THE WALL STREET JOURNAL.
China Firm to Buy
European Lender
BY MARGOT PATRICK
Legend Holdings Corp.
made one of China’s biggest
forays into European banking
with an agreement to buy
Banque Internationale à Lux-
embourg SA from its Qatari
owners and turn it into an in-
ternational banking brand.
Beijing-based Legend, best
known for its stake in com-
puter maker Lenovo Group
Ltd., said Friday that it would
pay Precision Capital SA
€1.48 billion ($1.76 billion) for
an 89.9% stake, valuing BIL at
€1.6 billion. The Luxembourg
government will continue
holding the remaining shares.
BIL is Luxembourg’s oldest
privately owned bank, founded
in 1856, when steel production
dominated the grand duchy’s
economy. Legend Holdings
Chairman Liu Chuanzhi said the
plan is to take BIL beyond being
a national champion and make
the brand international, while
keeping its base in Luxembourg.
Luxembourg, now reliant on
financial services to power its
economy, has become a hub
for Chinese banks operating in
Europe.
Only a few European banks
have been bought by the Chi-
nese, though. In 2014, China’s
Haitong Securities Co. Ltd.
Legend’s Liu Chuanzhi aims to make BIL’s brand international.
OVERHEARD
While they still beat car
salespeople and members of
Congress, the legal profession
doesn’t score very highly in
public surveys about per-
ceived ethics. Penny-ante tac-
tics like this might be one
reason why.
TD Bank branches in the
U.S. used to be known for
coin-counting machines called
penny arcades, but they were
removed over the past year
or so. Blame a lawsuit that
accused the bank of under-
counting. While the bank
didn’t admit this happened, it
chose not to litigate.
The 13 “class representa-
tives” named in the lawsuit
are set to receive awards not
to exceed $65,000. The law-
yers have requested an
award for their work not to
exceed $1,935,000. And the
thousands of other custom-
ers allegedly shortchanged?
The settlement should
amount to at least 26 cents
per $100 exchanged, which, in
the case of most customers,
probably doesn’t exceed the
value of a first-class postage
stamp.
stave off those declines, as
well as show investors that
the remaining business will
still generate a healthy cash
flow that can fund its divi-
dend, buybacks and an ac-
quisition campaign that has
netted four companies al-
ready this year.
Ms. Whitman’s flip-flop on
the Uber job gave Hewlett
Packard’s investors and em-
ployees reason to question
her commitment to the com-
pany.
To win them back, Ms.
Whitman has to prove she’s
either in it for the long haul
or has a plan to put Hewlett
Packard’s wheel into other
capable hands.
—Dan Gallagher
bought the former Banco Es-
pírito Santo investment bank-
ing business for €379 million.
Precision Capital, is a vehi-
cle of Qatar’s royal Al-Thani
family. It bought the bank in
2011 when BIL’s then-parent,
Dexia, was selling assets to
comply with conditions on a
state bailout from France, Bel-
gium and Luxembourg. The
purchase price then valued the
whole bank at €730 million.
BIL is Luxembourg’s
oldest privately
owned bank, founded
in 1856.
BIL had €37.7 billion in as-
sets under management at the
end of 2016 and total assets of
€23.1 billion.
Legend is known for its
portfolio of “new China” busi-
nesses in the consumer and fi-
nancial sectors, seen as likely
to grow quickly because of the
country’s expanding consumer
class. The investment group
already owns several financial
services company in China and
bought a stake in a U.K. pen-
sion insurer last year.
BOBBY YIP/REUTERS
WSJ.com/Heard
No Hurry
To Invest
In Music
Universal Music Group is
booming. It is a pity you can’t
invest in it without risking
money on the other parts of
quixotically managed media
group Vivendi.
Owner of the world’s larg-
est catalog of music rights,
Universal is a prime benefi-
ciary of the popularity of
streaming services like Spo-
tify. First-half like-for-like
revenue rose 14% year over
year, led by 45% growth in
subscription and streaming
revenue. Universal is working
closely with the new digital
distributors.
Having declined since the
late 1990s, the recorded-mu-
sic industry reached a nadir
in 2014. Last year, global rev-
enue rose 5.9% to $15.7 bil-
lion, a quarter of which came
from streaming subscriptions.
The profit is made by rights
owners, not the streamers.
It is a shame investors
have no way to get pure
stock-market exposure to the
business. Sony Music ac-
counts for less than a 10th of
Sony’s sales, while Warner
Music was taken private in
2011 .
Vivendi might seem the
best bet as Universal ac-
counts for half of revenue.
But the rest is unappealing: a
French cable-TV service that
faces declining revenue; a
videogame firm that barely
breaks even; a stake in Italy’s
former state telecom monop-
oly; and a listed advertising
agency. Dominant shareholder
Vincent Bolloré has offered
little explanation for this mix
beyond talk of media “conver-
gence.”
Investors may be better off
waiting until Universal is
spun off. Vivendi manage-
ment hints an IPO is the most
likely eventual outcome, but
hasn’t set a date. Mr. Bolloré
needs to act while the beat is
pumping. —Stephen Wilmot